Mohave Corporation makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine. Lost Mine offered to buy 1,600 US umbrellas at a price of $12 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost Regular sales price Required: $ 5.00 2.00 1.50 2.50 $ 11.00 $ 20.00 1. Compute the incremental profit (or loss) from accepting the special order. 2. Should Mohave accept the special order? 3. Suppose the special order had been to purchase 2,100 umbrellas for $8.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario. 4. Assume Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the incremental profit (or loss) from accepting the special order. Profit (or Loss) by Required 3 218 Required 4

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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Transcribed Image Text:Mohave Corporation makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine. Lost Mine offered to buy 1,600 US umbrellas at a price of $12 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost Regular sales price Required: 1. Compute the incremental profit (or loss) from accepting the special order. 2. Should Mohave accept the special order? 3. Suppose the special order had been to purchase 2,100 umbrellas for $8.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario. 4. Assume Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 increases Compute the incremental profit (or loss) from accepting the special order. Profit (or Loss) by decreases Required 1 Required 2 Should Mohave accept the special order? Should Mohave accept the special order? Required 3 increases decreases Required 1 Required 2 $ 5.00 2.00 1.50 2.50 $ 11.00 $ 20.00 Required 4 by Required 4 Required 1 Required 2 Required 3 Required 4 Suppose the special order had been to purchase 2,100 umbrellas for $8.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario. Profit (or Loss) Yes No Required 3 Required 4 Assume Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order. Special Order Price per Unit

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