Camino Company manufactures designer to-go coffee cups. Each line of coffee cups is endorsed by a high-profile celebrity and designed with special elements selected by the celebrity. During the most recent year, Camino Company had the following operating results while operating at 75 percent (75,000 units) of its capacity: Sales revenue Cost of goods sold Gross profit Operating expenses Net operating income. $ 900,000 375,000 $ 525,000 18,750 $ 506,250 Camino's cost of goods sold and operating expenses are 80 percent variable and 20 percent fixed. Camino has received an offer from a professional wrestling association to design a coffee cup endorsed by its biggest star and produce 20,000 cups for $8 each (total $160,000). These cups would be sold at wrestling matches throughout the United States. Acceptance of the order would require a $60,000 endorsement fee to the wrestling star, but no other increases in fixed operating expenses. Required:
Camino Company manufactures designer to-go coffee cups. Each line of coffee cups is endorsed by a high-profile celebrity and designed with special elements selected by the celebrity. During the most recent year, Camino Company had the following operating results while operating at 75 percent (75,000 units) of its capacity: Sales revenue Cost of goods sold Gross profit Operating expenses Net operating income. $ 900,000 375,000 $ 525,000 18,750 $ 506,250 Camino's cost of goods sold and operating expenses are 80 percent variable and 20 percent fixed. Camino has received an offer from a professional wrestling association to design a coffee cup endorsed by its biggest star and produce 20,000 cups for $8 each (total $160,000). These cups would be sold at wrestling matches throughout the United States. Acceptance of the order would require a $60,000 endorsement fee to the wrestling star, but no other increases in fixed operating expenses. Required:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Camino Company manufactures designer to-go coffee cups. Each line of coffee cups is endorsed by a high-profile celebrity and
designed with special elements selected by the celebrity. During the most recent year, Camino Company had the following operating
results while operating at 75 percent (75,000 units) of its capacity:
Sales revenue
Cost of goods sold
Gross profit
Operating expenses
Net operating income
Camino's cost of goods sold and operating expenses are 80 percent variable and 20 percent fixed. Camino has received an offer from
a professional wrestling association to design a coffee cup endorsed by its biggest star and produce 20,000 cups for $8 each (total
$160,000). These cups would be sold at wrestling matches throughout the United States. Acceptance of the order would require a
$60,000 endorsement fee to the wrestling star, but no other increases in fixed operating expenses.
Required:
1. Complete the incremental analysis of the special order in the table provided below.
2. Should Camino accept this special order?
3. If Camino were operating at full capacity, what price would Camino require for the special order?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
$ 900,000
375,000
$ 525,000
18,750
$ 506,250
Incremental Revenue
Required 3
Complete the incremental analysis of the special order in the table provided below.
Note: Enter per unit answers to 2 decimal places.
Less: Incremental Costs
Variable COGS
Variable Operating Expenses
Endorsement Fee
Incremental Profit
Per cup
Total
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