During December, the company received 2 special orders request from: Cestco and Sims. These orders are not part of the budgeted 45,000 units sales of Super OMEGA for 2023, but there is sufficient capacity for possibly one order to be accepted. Orders received and their terms are: Order from Cestco: 2,300 units at $545 per unit with spare Gasoline tank but without Gas option $11* per unit. Order from Sims: 2,600 units at $530 per unit with spare Gasoline tank & with Gas option $55* per unit. Analyze the profitability of each of these two special orders.Which special order should be accepted?What other aspects need to be considered in addition to profitability? Loma Generators, Inc. makes a variety of generators as a backup due to their problemswith the regular service. One of these products is a Generator model: Super OMEGA.This model includes the ultimate in technology and is in strong demand. Expecteddemand for this year is 45,000 units. Full production capacity for Super OMEGA is 49,000units, but 45,000 units are considered normal capacity. The following unit price andbreakdown applicable in 2023:Cost Item:Quantity of Production LevelSales PriceLess manufacturing costs:MaterialsDirect LaborOverhead: VariableFixedTotal manufacturing costsGross MarginLess selling and administrative expensesSelling: VariableFixedAdministrative, FixedGas Option, variable*Total selling and administrativeexpensesNet Profit before taxesTotal Net Profit before taxes per orderPer UnitActual45,000$600.00$110.00$28.00$15.00$26.00$179.00$421.00$5.00$27.00$17.00$55.00$104.00$317.00$14,265,000

The field of accounting known as cost accounting is utilized by manufacturing organizations to…

Answered: During December, the company received 2…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

During December, the company received 2 special orders request from: Cestco and Sims. These orders are not part of the budgeted 45,000 units sales of Super OMEGA for 2023, but there is sufficient capacity for possibly one order to be accepted. Orders received and their terms are:

Order from Cestco: 2,300 units at $545 per unit with spare Gasoline tank but without Gas option $11* per unit.
Order from Sims: 2,600 units at $530 per unit with spare Gasoline tank & with Gas option $55* per unit.

Analyze the profitability of each of these two special orders.
Which special order should be accepted?
What other aspects need to be considered in addition to profitability?

Loma Generators, Inc. makes a variety of generators as a backup due to their problems
with the regular service. One of these products is a Generator model: Super OMEGA.
This model includes the ultimate in technology and is in strong demand. Expected
demand for this year is 45,000 units. Full production capacity for Super OMEGA is 49,000
units, but 45,000 units are considered normal capacity. The following unit price and
breakdown applicable in 2023:
Cost Item:
Quantity of Production Level
Sales Price
Less manufacturing costs:
Materials
Direct Labor
Overhead: Variable
Fixed
Total manufacturing costs
Gross Margin
Less selling and administrative expenses
Selling: Variable
Fixed
Administrative, Fixed
Gas Option, variable*
Total selling and administrative
expenses
Net Profit before taxes
Total Net Profit before taxes per order
Per Unit
Actual
45,000
$600.00
$110.00
$28.00
$15.00
$26.00
$179.00
$421.00
$5.00
$27.00
$17.00
$55.00
$104.00
$317.00
$14,265,000

Expert Solution

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions