Answered: and will not be affected by the special…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Please help me with show all calculation thanku

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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