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Id Norton accept the invi g income if the order is ose that Norton's distribr

Id Norton accept the invi g income if the order is ose that Norton's distribr

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required 1. Should Norton accept the invitation to bid? Explain. What would be the impact on shortterm operating income if the order is accepted at the price recommended by the sales manager? 2. Suppose that Norton's distribution genter at the warehouse is operating at full capacity and would need to add capacity (leasing additional warehouse) costing S6,000 for every 10,000 units to be packed and shipped. What do you think the minimum bid price for the special order? Explain. 3. Based on the requirement no. 2, explain the relevant factors Norton should consider in deciding whether to bid in the special order. (at least two factor)
Transcribed Image Text:Required 1. Should Norton accept the invitation to bid? Explain. What would be the impact on shortterm operating income if the order is accepted at the price recommended by the sales manager? 2. Suppose that Norton's distribution genter at the warehouse is operating at full capacity and would need to add capacity (leasing additional warehouse) costing S6,000 for every 10,000 units to be packed and shipped. What do you think the minimum bid price for the special order? Explain. 3. Based on the requirement no. 2, explain the relevant factors Norton should consider in deciding whether to bid in the special order. (at least two factor)
Norton Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 20,000 units of one of its most popular products. Norton currently manufactures 40,000 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 of Norton wants to set the bid at $7 per unit because she is sure that Norton will get the business at that price. Others on the executive committee of the firm object, saying that Norton would lose money on the special order at that price. Units 40,000 Manufacturing Costs Direct Materials $ 90,000 Direct Labor 100,000 Factory Overhead Total Manufacturing Cost 260,000* $ 450,000 Unit Cost $ 11.25 *50% factory overhead is variable
Transcribed Image Text:Norton Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 20,000 units of one of its most popular products. Norton currently manufactures 40,000 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 of Norton wants to set the bid at $7 per unit because she is sure that Norton will get the business at that price. Others on the executive committee of the firm object, saying that Norton would lose money on the special order at that price. Units 40,000 Manufacturing Costs Direct Materials $ 90,000 Direct Labor 100,000 Factory Overhead Total Manufacturing Cost 260,000* $ 450,000 Unit Cost $ 11.25 *50% factory overhead is variable
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