STARTOM Inc, manufactures sporting equipment, including weight-lifting gloves. Anationalsporting goods chain recentlysubmitted a special order for 4,600 pairs of weight-lifting gloves. STARTOM JnC.was not operating at capacity and couldusetheextra business. Unfortunately, the order's offering price of $12.80 per pair was below the costto produce them. The controllerwas opposedto takingaloss onthe deal. However, the personnel manager arguedin favor of accepting the order even though aloss would be incurred; it would avoid the problem of layoffs andwouldhelp maintainthe community image of the company. Thefull costto produce a pair of weight-lifting gloves is presented as follows: Direct materials - S7.50; Direct labor- $3.90; Variableoverhead -$1.60; Fixed overhead - $3.10; Total - $16.10. No variable and selling or administrative expenses would beassociated with the order. Non-unit level activity costs are a small percentage oftotal costs and are therefore notcensidered Assume that the companywouldaccept the order onlyifitincreasedtotal profits. Should the company accept orreject the order?*AAccept, because the company would profit by $1.20 per unitB.Reject, because the company would incur an incremental loss per pair of $(0.20)C Reject, because the company's price per order is $12.80 which is below the cost to manufactureD.None of the above

The main aim of any business is to maximise profit . When there is…

Answered: Inc manufactures sporting equipment,…

Business

Accounting

Inc manufactures sporting equipment, including weight-lifting gloves. Anationalsporting goods chain recently

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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