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. Sales revenue Costs of fitting produced Gross profit Administrative costs Operating profit Amount Per Unit $ 1,170,000 $ 26.00 # 900,000 $ 270,000 207,000 $ 63,000 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. 20.00 $ 6.00 4.60 $ 1.40 Required: a. What impact would accepting this special order have on operating profit? b. Should RTD accept the order? Required A Complete this question by entering your answers in the tabs below. Required B 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.)
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. Sales revenue Costs of fitting produced Gross profit Administrative costs Operating profit Amount Per Unit $ 1,170,000 $ 26.00 # 900,000 $ 270,000 207,000 $ 63,000 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. 20.00 $ 6.00 4.60 $ 1.40 Required: a. What impact would accepting this special order have on operating profit? b. Should RTD accept the order? Required A Complete this question by entering your answers in the tabs below. Required B 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
Sales revenue
Costs of fitting produced
Gross profit
Administrative costs
Operating profit
Amount
$ 1,170,000
900,000
$ 270,000
207,000
$ 63,000
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.
Per Unit
$ 26.00
20.00
$ 6.00
4.60
$ 1.40
Required:
a. What impact would accepting this special order have on operating profit?
b. Should RTD accept the order?
Required A
Complete this question by entering your answers in the tabs below.
Required B
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.)
Show log
Transcribed Image Text:Sales revenue
Variable costs:
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
< Required A
Difference
higher
higher
0 none
higher
o none
higher
Required B >
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