Nardin Outfitters has a capacity to produce 13,000 of their special arctic tents per year. The company is currently producing and selling 5,000 tents per year at a selling price of $1,000 per tent. The cost of producing and selling one tent follows: Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Total costs $ 460 100 90 60 $ 710 The company has received a special order for 700 tents at a price of $620 per tent from Chipman Outdoor Center. It will not have to pay any sales commission on the special order, so the variable selling and administrative costs would be only $47 per tent. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations: Selling price per case Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Net profit (loss) per case Required: $ 620 460 100 47 60 $ (47) a. What is the impact on profit for the year if Nardin Outfitters accepts the special order? b. Do you agree with the decision to reject the special order?

Principles of Accounting Volume 2
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Chapter10: Short-term Decision Making
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Nardin Outfitters has a capacity to produce 13,000 of their special arctic tents per year. The company is currently producing and selling
5,000 tents per year at a selling price of $1,000 per tent. The cost of producing and selling one tent follows:
Variable manufacturing costs
Fixed manufacturing costs
Variable selling and administrative costs
Fixed selling and administrative costs
Total costs
$ 460
100
90
60
$ 710
The company has received a special order for 700 tents at a price of $620 per tent from Chipman Outdoor Center. It will not have to
pay any sales commission on the special order, so the variable selling and administrative costs would be only $47 per tent. The special
order would have no effect on total fixed costs. The company has rejected the offer based on the following computations:
Selling price per case
Variable manufacturing costs
Fixed manufacturing costs
Variable selling and administrative costs
Fixed selling and administrative costs
Net profit (loss) per case
Required:
$ 620
460
100
47
60
$ (47)
a. What is the impact on profit for the year if Nardin Outfitters accepts the special order?
b. Do you agree with the decision to reject the special order?
Transcribed Image Text:Nardin Outfitters has a capacity to produce 13,000 of their special arctic tents per year. The company is currently producing and selling 5,000 tents per year at a selling price of $1,000 per tent. The cost of producing and selling one tent follows: Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Total costs $ 460 100 90 60 $ 710 The company has received a special order for 700 tents at a price of $620 per tent from Chipman Outdoor Center. It will not have to pay any sales commission on the special order, so the variable selling and administrative costs would be only $47 per tent. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations: Selling price per case Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Net profit (loss) per case Required: $ 620 460 100 47 60 $ (47) a. What is the impact on profit for the year if Nardin Outfitters accepts the special order? b. Do you agree with the decision to reject the special order?
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