Nardin Outfitters has a capacity to produce 22,000 of their special arctic tents per year. The company is currently producing and selling 5,000 tents per year at a selling price of $1,900 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 The company has received a special order for 2,500 tents at a price of $800 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 $65 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 $ 640 190 180 150 $ 1,160 Fixed selling and administrative costs Net profit (loss) per case $ 800 640 190 65 150 $ (245) Required: 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? Complete this question by entering your answers in the tabs below.
Nardin Outfitters has a capacity to produce 22,000 of their special arctic tents per year. The company is currently producing and selling 5,000 tents per year at a selling price of $1,900 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 The company has received a special order for 2,500 tents at a price of $800 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 $65 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 $ 640 190 180 150 $ 1,160 Fixed selling and administrative costs Net profit (loss) per case $ 800 640 190 65 150 $ (245) Required: 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? Complete this question by entering your answers in the tabs below.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
A2
Transcribed Image Text:What is the impact on profit for the year ifNardin Outfitters accepts the special order? (Enter your answers in thousands
rounded to 1 decimal place. (i.e., 5,400,400 should be entered as 5,400.4). Select option "higher" or "lower", keeping Status
Quo as the base. Select "none" if there is no effect.)
Sales revenue
Variable costs:
Manufacturing
Selling and administrative
Contribution margin
Fixed costs
Operating profit
(All revenues and costs in $000)
Status Quo
Alternative
7500 Units
5000 Units
Difference
Transcribed Image Text:Nardin Outfitters has a capacity to produce 22,000 of their special arctic tents per year. The company is currently producing and
selling 5,000 tents per year at a selling price of $1,900 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
The company has received a special order for 2,500 tents at a price of $800 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 $65 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
$ 640
190
180
150
$ 1,160
Fixed manufacturing costs
Variable selling and administrative costs
Fixed selling and administrative costs
Net profit (loss) per case
$ 800
640
190
65
150
$ (245)
Required:
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?
Complete this question by entering your answers in the tabs below.
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