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?
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?
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 4EB: Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all...
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