First Company manufactures knife sets. For the first ten months of 2021, the company reported the following operating results while operating at 80% of plant capacity: Sales (500,000 units) $90,000,000 Cost of goods sold 54,000,000 Gross profit 36,000,000 Operating expenses 24,000,000 Net income $12,000,000 An analysis of costs and expenses reveals that variable cost of goods sold is $85 per unit and variable operating expenses are $35 per unit. In November, Firsts Cutlery Company receives a special order for 30,000 knife sets at $135 each from a major retail shop franchise. Acceptance of the order would result in $10,000 of shipping costs but no increase in fixed expenses. Instructions (a) Evaluate and Determine Whether to Accept or Reject this Special Order.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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First Company manufactures knife sets. For the first ten months of 2021, the company reported the following operating results while operating at 80% of plant capacity: Sales (500,000 units) $90,000,000 Cost of goods sold 54,000,000 Gross profit 36,000,000 Operating expenses 24,000,000 Net income $12,000,000 An analysis of costs and expenses reveals that variable cost of goods sold is $85 per unit and variable operating expenses are $35 per unit. In November, Firsts Cutlery Company receives a special order for 30,000 knife sets at $135 each from a major retail shop franchise. Acceptance of the order would result in $10,000 of shipping costs but no increase in fixed expenses.

Instructions (a) Evaluate and Determine Whether to Accept or Reject this Special Order.

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