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Kapol Company's normal capacity is 60,000 units. Since the past few months, it has utilized only one half of this capacity. For last month, the result of its operations is summarized in the following statement: Sales (30,000 units) P 1,500,000 Less Variable Costs 600,000 Contribution Margin 900,000 Less fixed costs 500,000 Profit P 400,000 Of the variable and fixed costs shown on the statement, 4 are manufacturing costs; the balance represents selling and administrative costs. This month, a customer submitted a proposal to buy 35,000 units of Kapol Company's product at P25 per unit. The only selling cost to be incurred for this order is P4.00 per unit representing freight charges that will be shouldered by Kapol. If this special order proves to be acceptable, Kapol is willing to reduce sales to regular customers so as not to exceed its normal capacity. Should the order be accepted? Activa

Kapol Company's normal capacity is 60,000 units. Since the past few months, it has utilized only one half of this capacity. For last month, the result of its operations is summarized in the following statement: Sales (30,000 units) P 1,500,000 Less Variable Costs 600,000 Contribution Margin 900,000 Less fixed costs 500,000 Profit P 400,000 Of the variable and fixed costs shown on the statement, 4 are manufacturing costs; the balance represents selling and administrative costs. This month, a customer submitted a proposal to buy 35,000 units of Kapol Company's product at P25 per unit. The only selling cost to be incurred for this order is P4.00 per unit representing freight charges that will be shouldered by Kapol. If this special order proves to be acceptable, Kapol is willing to reduce sales to regular customers so as not to exceed its normal capacity. Should the order be accepted? Activa

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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ACCEPT OR REJECT SPECIAL ORDER
Kapol Company's normal capacity is 60,000 units. Since the past few months, it has utilized only one half of this capacity. For last month, the result of its operations is summarized in the following statement: Sales (30,000 units) P 1,500,000 Less Variable Costs 600,000 Contribution Margin 900,000 Less fixed costs 500,000 Profit P 400,000 Of the variable and fixed costs shown on the statement, 4 are manufacturing costs; the balance represents selling and administrative costs. This month, a customer submitted a proposal to buy 35,000 units of Kapol Company's product at P25 per unit. The only selling cost to be incurred for this order is P4.00 per unit representing freight charges that will be shouldered by Kapol. If this special order proves to be acceptable, Kapol is willing to reduce sales to regular customers so as not to exceed its normal capacity. Should the order be accepted? Activate Win
Transcribed Image Text:Kapol Company's normal capacity is 60,000 units. Since the past few months, it has utilized only one half of this capacity. For last month, the result of its operations is summarized in the following statement: Sales (30,000 units) P 1,500,000 Less Variable Costs 600,000 Contribution Margin 900,000 Less fixed costs 500,000 Profit P 400,000 Of the variable and fixed costs shown on the statement, 4 are manufacturing costs; the balance represents selling and administrative costs. This month, a customer submitted a proposal to buy 35,000 units of Kapol Company's product at P25 per unit. The only selling cost to be incurred for this order is P4.00 per unit representing freight charges that will be shouldered by Kapol. If this special order proves to be acceptable, Kapol is willing to reduce sales to regular customers so as not to exceed its normal capacity. Should the order be accepted? Activate Win
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