Pamela in Bamplona makes bull-repellent scent according to a traditional Spanish recipe, which normally sells at €9 (Euros) per unit. Normal production volume is 10,000 ounces per month. Average cost is €5 per ounce, of which €2 is direct material and €1 is variable conversion cost. This product is seasonal. After July, demand for this product drops to 6,000 ounces monthly. In November, Umberto offers to buy 1,500 ounces for €6,000. Now assume that the order is received in July, peak season. If Pamela accepts the order, she will turn away regular customers who order 500 ounces. Pamela should: a. reject the order, which loses €1,875 b.reject the order as it is less than her cost c.accept the order if Umberto raises the price higher than €6.58/ounce d.accept the order if Umberto raises the price higher than €5.58/ounce
Pamela in Bamplona makes bull-repellent scent according to a traditional Spanish recipe, which normally sells at €9 (Euros) per unit. Normal production volume is 10,000 ounces per month. Average cost is €5 per ounce, of which €2 is direct material and €1 is variable conversion cost. This product is seasonal. After July, demand for this product drops to 6,000 ounces monthly. In November, Umberto offers to buy 1,500 ounces for €6,000. Now assume that the order is received in July, peak season. If Pamela accepts the order, she will turn away regular customers who order 500 ounces. Pamela should: a. reject the order, which loses €1,875 b.reject the order as it is less than her cost c.accept the order if Umberto raises the price higher than €6.58/ounce d.accept the order if Umberto raises the price higher than €5.58/ounce
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please help me with show all calculation thanku
Transcribed Image Text:Pamela in Bamplona makes bull-repellent
scent according to a traditional Spanish
recipe, which normally sells at €9 (Euros)
per unit. Normal production volume is
10,000 ounces per month. Average cost is
€5 per ounce, of which €2 is direct material
and €1 is variable conversion cost. This
product is seasonal. After July, demand for
this product drops to 6,000 ounces
monthly. In November, Umberto offers to
buy 1,500 ounces for €6,000. Now assume
that the order is received in July, peak
season. If Pamela accepts the order, she
will turn away regular customers who order
500 ounces. Pamela should:
a. reject the order, which loses €1,875
b.reject the order as it is less than her cost
c.accept the order if Umberto raises the
price higher than €6.58/ounce
d.accept the order if Umberto raises the
price higher than €5.58/ounce
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education