Burns Industries currently manufactures and sells 17,000 power saws per month, although it has the capacity to produce 32,000 units per month. At the 17,000-unit-per-month level of production, the per-unit cost is $59, consisting of $37 in variable costs and $22 in fixed costs. Burns sells its saws to retail stores for $77 each. Allen Distributors has offered to purchase 4,700 saws per month at a reduced price. Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs. a) Using an incremental analysis approach, Burns should consider accepting this special order only if the price per unit offered by Allen is at least what? b) Burns decides to accept the special order for 4,700 units from Allen at a unit sales price that will add $94,000 per month to its operating income. What is the unit price Burns is charging Allen?
Burns Industries currently manufactures and sells 17,000 power saws per month, although it has the capacity to produce 32,000 units per month. At the 17,000-unit-per-month level of production, the per-unit cost is $59, consisting of $37 in variable costs and $22 in fixed costs. Burns sells its saws to retail stores for $77 each. Allen Distributors has offered to purchase 4,700 saws per month at a reduced price. Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs. a) Using an incremental analysis approach, Burns should consider accepting this special order only if the price per unit offered by Allen is at least what? b) Burns decides to accept the special order for 4,700 units from Allen at a unit sales price that will add $94,000 per month to its operating income. What is the unit price Burns is charging Allen?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Burns Industries currently manufactures and sells 17,000 power saws per
month, although it has the capacity to produce 32,000 units per month. At
the 17,000-unit-per-month level of production, the per-unit cost is $59,
consisting of $37 in variable costs and $22 in fixed costs. Burns sells its
saws to retail stores for $77 each. Allen Distributors has offered to
purchase 4,700 saws per month at a reduced price. Burns can
manufacture these additional units with no change in its present level of
fixed manufacturing costs.
a) Using an incremental analysis approach, Burns should consider
accepting this special order only if the price per unit offered by Allen is at
least what?
b) Burns decides to accept the special order for 4,700 units from Allen at a
unit sales price that will add $94,000 per month to its operating income.
What is the unit price Burns is charging Allen?
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