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 45,000 units during the quarter. RTD carries no inventories. Per Unit $26.00 20.00 $6.00 4.60 Administrative costs. Operating profit $ 63,000 $ 1.40 Fixed costs included in this income statement are $292,500 for depreciation on plant and machinery and miscellaneous factory operations and $94,500 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 $20 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. Sales revenue Costs of fitting produced Gross profit 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. Required A Amount $ 1,170,000 900, 000 $ 270,000 207, 000 Sales revenue Variable costs: Required B What impact would accepting this special order have on operating profit? Note: 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. Production Administrative Contribution margin Fixed costs Operating profit Costs and Revenues (Thousands of Dollars) Status Quo 45,000 Alternative 55,000 Units Difference Units $ 1,170,000.0 $ 1,370,000.0 $ 200,000.0 higher Show less
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 45,000 units during the quarter. RTD carries no inventories. Per Unit $26.00 20.00 $6.00 4.60 Administrative costs. Operating profit $ 63,000 $ 1.40 Fixed costs included in this income statement are $292,500 for depreciation on plant and machinery and miscellaneous factory operations and $94,500 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 $20 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. Sales revenue Costs of fitting produced Gross profit 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. Required A Amount $ 1,170,000 900, 000 $ 270,000 207, 000 Sales revenue Variable costs: Required B What impact would accepting this special order have on operating profit? Note: 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. Production Administrative Contribution margin Fixed costs Operating profit Costs and Revenues (Thousands of Dollars) Status Quo 45,000 Alternative 55,000 Units Difference Units $ 1,170,000.0 $ 1,370,000.0 $ 200,000.0 higher Show less
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
nik.4
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 45,000 units
during the quarter. RTD carries no inventories.
Amount
$ 1,170,000
Sales revenue
900,000
Costs of fitting produced
Gross profit
$ 270,000
Administrative costs.
207, 000
$ 63,000
Operating profit
Fixed costs included in this income statement are $292,500 for depreciation on plant and machinery and miscellaneous factory
operations and $94,500 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 $20 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.
Required A
Per Unit
$26.00
20.00
$6.00
4.60
$ 1.40
Sales revenue
Variable costs:
Required B
What impact would accepting this special order have on operating profit?
Note: 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.
Production
Administrative
Contribution margin
Fixed costs
Operating profit
Costs and Revenues
(Thousands of Dollars)
Status Quo 45,000 Alternative 55,000
Units
Units
$ 1,170,000.0 $
1,370,000.0 $200,000.0 higher
Difference
Show less
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