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Required (a) Should Brackley Co. accept the order or not? (b) If Brackley Co. had no spare capacity in the plant, would the answer be the same? (c) If Brackley Co.'s spare capacity is 25,000 pies per month, what would be the minimum selling price for Brackley Co. to accept the order of 50,000 pies per month from the Manitoba grocery chain?

Required (a) Should Brackley Co. accept the order or not? (b) If Brackley Co. had no spare capacity in the plant, would the answer be the same? (c) If Brackley Co.'s spare capacity is 25,000 pies per month, what would be the minimum selling price for Brackley Co. to accept the order of 50,000 pies per month from the Manitoba grocery chain?

FINANCIAL ACCOUNTING
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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5. At present, Brackley Co.'s marketing and sales activities are only in Ontario and western Quebec. A grocery chain in Manitoba has asked them to supply 50,000 pies per month at a price of $2 per pie. The marketing manager thinks that the company should refuse the contract because $2 is so far below its normal selling price of $3. The production manager thinks that the company should accept the order as there is spare capacity in the plant, and the variable selling costs (delivery and commission) would not be incurred in respect of this order. Required (a) Should Brackley Co. accept the order or not? (b) If Brackley Co. had no spare capacity in the plant, would the answer be the same? (c) If Brackley Co.'s spare capacity is 25,000 pies per month, what would be the minimum selling price for Brackley Co. to accept the order of 50,000 pies per month from the Manitoba grocery chain?
Transcribed Image Text:5. At present, Brackley Co.'s marketing and sales activities are only in Ontario and western Quebec. A grocery chain in Manitoba has asked them to supply 50,000 pies per month at a price of $2 per pie. The marketing manager thinks that the company should refuse the contract because $2 is so far below its normal selling price of $3. The production manager thinks that the company should accept the order as there is spare capacity in the plant, and the variable selling costs (delivery and commission) would not be incurred in respect of this order. Required (a) Should Brackley Co. accept the order or not? (b) If Brackley Co. had no spare capacity in the plant, would the answer be the same? (c) If Brackley Co.'s spare capacity is 25,000 pies per month, what would be the minimum selling price for Brackley Co. to accept the order of 50,000 pies per month from the Manitoba grocery chain?
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