1.Jed Corporation manufactures recreational equipment.Frey Corporation has approached Jed with a specialorder for 30,000 soft balls. Instead of being packagedseparately, the balls are to be bulk packed in boxescontaining 500 balls each. Frey is willing to pay $2.45per ball. Jed's Accounting Department knows thatannual expected production is 400,000 balls. It alsoknows that the current year's production is 410,000balls and that the maximum production capacity is450,000 balls. The following additional information isavailable.Standard unit cost data for 400,000 balls:Direct materialsDirect labor$..90.60Manufacturing overheadVariableFixed ($100,000/400,000) .25.50Packaging per unit.30Advertising ($60,000/400,000) .15Other fixed selling and administrativeexpenses ($120,000/400,000) 30Product unit cost$3.00Unit selling price$4.00Total estimated bulk packaging costsfor special order (30,000 balls,500 per box)$2,500a. Determine the incremental (relevant) costs and revenuesof the decision to accept or not accept the specialorder, and create an incremental analysis proving theresult.b. Assuming Jed does accept the order, how much willoperating income increase (decrease)?c. Assuming Jed wants a $3,000 profit, what is theminimum price it should accept for each ball (round tonearest cent)?

A firm may receive a special offer in bulk quantity apart from its normal sales. The special offer…

Answered: Jed Corporation manufactures…

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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