and will not be affected by the special order. Normally, there is a commission of 9 percent of price: this will not be paid on the chain's logo on each box.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Please help me with show all calculation thanku 

Sequoia Paper Products, Inc., manufactures boxed stationery for sale to specialty shops. Currently, the company is operating at 85 percent of capacity. A chain of drugstores has offered to buy 30,000 boxes of Sequoia's blue-bordered thank-you notes as long as the box can be customized with the drugstore chain's logo. While the
normal selling price is $6.10 per box, the chain has offered just $3.40 per box. Sequoia can accommodate the special order without affecting current sales. Unit cost information for a box of thank-you notes follows:
Direct materials
Direct labor
Variable overhead
Fixed overhead
Total cost per box
$1.70
0.39
0.07
2.15
$4.31
Fixed overhead is $416,000 per year and will not be affected by the special order. Normally, there is a commission of 9 percent of price; this will not be paid on the special order since the drugstore chain is dealing directly with the company. The special order will require additional fixed costs of $14,700 for the design and setup of
the machinery to stamp the drugstore chain's logo on each box.
Required:
1. Which alternative is more cost effective and by how much?
Accept the special order
✓
The operating income would increase by $
Transcribed Image Text:Sequoia Paper Products, Inc., manufactures boxed stationery for sale to specialty shops. Currently, the company is operating at 85 percent of capacity. A chain of drugstores has offered to buy 30,000 boxes of Sequoia's blue-bordered thank-you notes as long as the box can be customized with the drugstore chain's logo. While the normal selling price is $6.10 per box, the chain has offered just $3.40 per box. Sequoia can accommodate the special order without affecting current sales. Unit cost information for a box of thank-you notes follows: Direct materials Direct labor Variable overhead Fixed overhead Total cost per box $1.70 0.39 0.07 2.15 $4.31 Fixed overhead is $416,000 per year and will not be affected by the special order. Normally, there is a commission of 9 percent of price; this will not be paid on the special order since the drugstore chain is dealing directly with the company. The special order will require additional fixed costs of $14,700 for the design and setup of the machinery to stamp the drugstore chain's logo on each box. Required: 1. Which alternative is more cost effective and by how much? Accept the special order ✓ The operating income would increase by $
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