Flower Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 17,500 units of one of its most popular products. Flower currently manufactures 35,000 units of this product in its Loveland, Ohio, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager wants to set the bid at $13 because she is sure that Flower will get the business at that price. Others on the executive committee of the firm object, saying that Flower would lose money on the special order at that price.   Units 35,000 52,500 Manufacturing costs:     Direct materials $ 175,000 $ 262,500 Direct labor 210,000 315,000 Factory overhead 140,000 157,500 Total manufacturing costs $ 525,000 $ 735,000 Unit cost $ 15 $ 14   2. What is the relevant cost per unit? What do you think the minimum short-term bid price per unit should be? What would be the impact on short-term operating income if the order is accepted at the price recommended by the sales manager? 4. What would the total opportunity cost be if by accepting the special order the company lost sales of 5,600 units to its regular customers? Assume the preceding facts plus a normal selling price of $28 per unit.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Flower Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 17,500 units of one of its most popular products. Flower currently manufactures 35,000 units of this product in its Loveland, Ohio, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager wants to set the bid at $13 because she is sure that Flower will get the business at that price. Others on the executive committee of the firm object, saying that Flower would lose money on the special order at that price.

 

Units 35,000 52,500
Manufacturing costs:    
Direct materials $ 175,000 $ 262,500
Direct labor 210,000 315,000
Factory overhead 140,000 157,500
Total manufacturing costs $ 525,000 $ 735,000
Unit cost $ 15 $ 14

 

2. What is the relevant cost per unit?

What do you think the minimum short-term bid price per unit should be?

What would be the impact on short-term operating income if the order is accepted at the price recommended by the sales manager?

4. What would the total opportunity cost be if by accepting the special order the company lost sales of 5,600 units to its regular customers? Assume the preceding facts plus a normal selling price of $28 per unit.

 

AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
steps

Unlock instant AI solutions

Tap the button
to generate a solution

Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education