a. What is the normal incremental cost of producing and selling a case of hot chocolate? What is the inc associated with this special-order? b-1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats selling 10,000 cases per month? b-2. What is the opportunity cost of not accepting the offer? c-1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats capacity of 12,000 cases per month? c-2. What is the opportunity cost of accepting the offer?

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Exercise 21.5 (Static) Special Order Decisions and Opportunity Costs (LO21-1, LO21-2, LO21-3, L021-4)
Heavenly Treat manufactures cases of hot chocolate that are typically sold to restaurants. Its main factory has the capacity to produce
and sell 12,000 cases per month. The following information is available for the factory.
Sales price per case
Variable cost per case:
Direct materials
Direct labor
Variable overhead & sales commissions
Fixed costs per month
40
12
10
$ 60,000
Wildwood Camps is a youth organization that serves hot chocolate at its camping facilities throughout Montana. The organization has
offered Heavenly Treat $29 per case for a special-order batch of 1,000 cases. Each case would require a shrink-wrap covering
because of moisture problems associated with the organization's storage warehouses. The cost to shrink-wrap the order is estimated
at $3 per case. Selling costs associated with the order would be decreased by $1 per case because it would not include any sales
commissions.
a. What is the normal incremental cost of producing and selling a case of hot chocolate? What is the incremental cost per case
associated with this special-order?
b-1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is currently producing and
selling 10,000 cases per month?
b-2. What is the opportunity cost of not accepting the offer?
c-1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is currently operating at its full
capacity of 12,000 cases per month?
c-2. What is the opportunity cost of accepting the offer?
<Prev
3 of 4
Next >
23
NOV
18
étv i
280
%24
Transcribed Image Text:Exercise 21.5 (Static) Special Order Decisions and Opportunity Costs (LO21-1, LO21-2, LO21-3, L021-4) Heavenly Treat manufactures cases of hot chocolate that are typically sold to restaurants. Its main factory has the capacity to produce and sell 12,000 cases per month. The following information is available for the factory. Sales price per case Variable cost per case: Direct materials Direct labor Variable overhead & sales commissions Fixed costs per month 40 12 10 $ 60,000 Wildwood Camps is a youth organization that serves hot chocolate at its camping facilities throughout Montana. The organization has offered Heavenly Treat $29 per case for a special-order batch of 1,000 cases. Each case would require a shrink-wrap covering because of moisture problems associated with the organization's storage warehouses. The cost to shrink-wrap the order is estimated at $3 per case. Selling costs associated with the order would be decreased by $1 per case because it would not include any sales commissions. a. What is the normal incremental cost of producing and selling a case of hot chocolate? What is the incremental cost per case associated with this special-order? b-1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is currently producing and selling 10,000 cases per month? b-2. What is the opportunity cost of not accepting the offer? c-1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is currently operating at its full capacity of 12,000 cases per month? c-2. What is the opportunity cost of accepting the offer? <Prev 3 of 4 Next > 23 NOV 18 étv i 280 %24
a. What is the normal incremental cost of producing and selling a case of hot chocolate? What is the incr
associated with this special-order?
b-1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats
selling 10,000 cases per month?
b-2. What is the opportunity cost of not accepting the offer?
c-1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is
capacity of 12,000 cases per month?
c-2. What is the opportunity cost of accepting the offer?
a.
Incremental unit cost of creating a normal case
Incremental unit cost of creating a special-order case
b-1. Impact on operating profit
b-2. Opportunity cost
c-1. Impact on operating profit
c-2. Opportunity cost
Transcribed Image Text:a. What is the normal incremental cost of producing and selling a case of hot chocolate? What is the incr associated with this special-order? b-1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats selling 10,000 cases per month? b-2. What is the opportunity cost of not accepting the offer? c-1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is capacity of 12,000 cases per month? c-2. What is the opportunity cost of accepting the offer? a. Incremental unit cost of creating a normal case Incremental unit cost of creating a special-order case b-1. Impact on operating profit b-2. Opportunity cost c-1. Impact on operating profit c-2. Opportunity cost
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