Craft Wood Manufacturing has received a special one-time order for 2,500 tables (units) at $10 per unit. Craft Wood currently produces and sells 8,000 units at $12 each. This level represents 80% of its capacity. Production costs for these units are $6.0 per unit, which includes $3 variable cost and $3 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $2,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. If Craft Wood wishes to earn $1,500 on the special order, what should be the size of the order?

Craft Wood Manufacturing has received a special one-time order for 2,500 tables (units) at $10 per unit. Craft Wood currently produces and sells 8,000 units at $12 each. This level represents 80% of its capacity. Production costs for these units are $6.0 per unit, which includes $3 variable cost and $3 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $2,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. If Craft Wood wishes to earn $1,500 on the special order, what should be the size of the order?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...

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Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?
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