Kneller Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 30,000 medals each month; current monthly production is 10,000 medals. The company normally charges $119 per medal. Cost data for the current level of production are shown below: Variable costs: Direct materials $ 576,900 Direct labor $ 184,600 Selling and administrative $ 29,900 Fixed costs: Manufacturing $ 172,600 Selling and administrative $ 94,400 The company has just received a special one-time order for 500 medals at $108 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Assume that direct labor is a variable cost. Required: Should the company accept this special order? multiple choice Accepted Not accepted
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Kneller Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 30,000 medals each month; current monthly production is 10,000 medals. The company normally charges $119 per medal. Cost data for the current level of production are shown below:
| Variable costs: | ||
| Direct materials | $ | 576,900 |
| Direct labor | $ | 184,600 |
| Selling and administrative | $ | 29,900 |
| Fixed costs: | ||
| Manufacturing | $ | 172,600 |
| Selling and administrative | $ | 94,400 |
The company has just received a special one-time order for 500 medals at $108 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Assume that direct labor is a variable cost.
Required:
Should the company accept this special order?
multiple choice
-
Accepted
-
Not accepted
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