Lakeside Inc. produces a product that currently sells for $72.00 per unit. Current production costs per unit include direct materials, $27; direct labor, $29; variable overhead, $13.50; and fixed overhead, $13.50. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Lakeside has received an offer from a nonprofit organization to buy 9,700 units at $70.30 per unit. Lakeside currently has unused production capacity. Required: a. Calculate the effect on Lakeside's operating income of accepting the order from the nonprofit organization. Increase/Decrease of operating income of $ b. Should Lakeside accept this special sales order? ● Yes No
Lakeside Inc. produces a product that currently sells for $72.00 per unit. Current production costs per unit include direct materials, $27; direct labor, $29; variable overhead, $13.50; and fixed overhead, $13.50. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Lakeside has received an offer from a nonprofit organization to buy 9,700 units at $70.30 per unit. Lakeside currently has unused production capacity. Required: a. Calculate the effect on Lakeside's operating income of accepting the order from the nonprofit organization. Increase/Decrease of operating income of $ b. Should Lakeside accept this special sales order? ● Yes No
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Lakeside Inc. produces a product that currently
sells for $72.00 per unit. Current production
costs per unit include direct materials, $27;
direct labor, $29; variable overhead, $13.50; and
fixed overhead, $13.50. Product engineering has
determined that certain production changes
could refine the product quality and
functionality. These new production changes
would increase material and labor costs by 20%
per unit. Lakeside has received an offer from a
nonprofit organization to buy 9,700 units at
$70.30 per unit. Lakeside currently has unused
production capacity.
Required:
a. Calculate the effect on Lakeside's operating
income of accepting the order from the
nonprofit organization.
Increase/Decrease of operating
income of $
b. Should Lakeside accept this special sales
order?
●
Yes
No
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