Rowe lool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the orecasted income statement for the next quarter, which is the typical planning horizon used at RTD. RTD expects to sell 55,000 units during the quarter. RTD carries no inventories. Sales revenue Costs of fitting produced Gross profit Administrative costs Operating profit Amount $ 1,595,000 1,210,000 $ 385,000 280,500 $ 104,500 Per Unit $29.00 22.00 $ 7.00 5.10 $ 1.90 Fixed costs included in this income statement are $357,500 for depreciation on plant and machinery and miscellaneous factory operations and $99,500 for administrative costs. RTD has received a request for 10,000 fittings to be produced in the next quarter rom Endicott Manufacturing. Endicott has never purchased from RTD, although they have been a local company for many years. Endicott has offered to pay $21.00 per unit. RTD can easily produce the 10,000 units with its existing capacity. Production of the 10,000 units will incur all variable manufacturing costs but no fixed manufacturing costs. No administrative costs will be incurred because of he order. Required: . What impact would accepting this special order have on operating profit? . Should RTD accept the order?
Rowe lool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the orecasted income statement for the next quarter, which is the typical planning horizon used at RTD. RTD expects to sell 55,000 units during the quarter. RTD carries no inventories. Sales revenue Costs of fitting produced Gross profit Administrative costs Operating profit Amount $ 1,595,000 1,210,000 $ 385,000 280,500 $ 104,500 Per Unit $29.00 22.00 $ 7.00 5.10 $ 1.90 Fixed costs included in this income statement are $357,500 for depreciation on plant and machinery and miscellaneous factory operations and $99,500 for administrative costs. RTD has received a request for 10,000 fittings to be produced in the next quarter rom Endicott Manufacturing. Endicott has never purchased from RTD, although they have been a local company for many years. Endicott has offered to pay $21.00 per unit. RTD can easily produce the 10,000 units with its existing capacity. Production of the 10,000 units will incur all variable manufacturing costs but no fixed manufacturing costs. No administrative costs will be incurred because of he order. Required: . What impact would accepting this special order have on operating profit? . Should RTD accept the order?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Rowe Tool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the
forecasted income statement for the next quarter, which is the typical planning horizon used at RTD. RTD expects to sell 55,000 units
during the quarter. RTD carries no inventories.
Sales revenue
Costs of fitting produced
Gross profit
Administrative costs
Operating profit
Required A
Fixed costs included in this income statement are $357,500 for depreciation on plant and machinery and miscellaneous factory
operations and $99,500 for administrative costs. RTD has received a request for 10,000 fittings to be produced in the next quarter
from Endicott Manufacturing. Endicott has never purchased from RTD, although they have been a local company for many years.
Endicott has offered to pay $21.00 per unit. RTD can easily produce the 10,000 units with its existing capacity. Production of the 10,000
units will incur all variable manufacturing costs but no fixed manufacturing costs. No administrative costs will be incurred because of
the order.
Required:
a. What impact would accepting this special order have on operating profit?
b. Should RTD accept the order?
Complete this question by entering your answers in the tabs below.
Sales revenue
Variable costs:
Amount
$ 1,595,000
1,210,000
$ 385,000
280,500
$ 104,500
Required B
Production
Administrative
Per Unit
$29.00
22.00
$7.00
5.10
$ 1.90
What impact would accepting this special order have on operating profit? (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.)
Contribution margin
Fixed costs
Operating profit
Costs and Revenues
(Thousands of Dollars)
Status Quo 55,000 Alternative 65,000
Units
Units
Difference
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