Sales price per case Wariable cost per case: Direct materials Direct labor Variable overhead & sales commissions Fixed costs per month 40 12 3 10 $ 60,000 Idwood Camps is a youth organization that serves hot chocolate at its camping facilities throughout Montana. The organization has ered Heavenly Treat $29 per case for a special-order batch of 1,000 cases. Each case would require a shrink-wrap covering cause of moisture problems associated with the organization's storage warehouses. The cost to shrink-wrap the order is estimated $3 per case. Selling costs associated with the order would be decreased by $1 per case because it would not include any sales mmissions. What is the normal incremental cost of producing and selling a case of hot chocolate? What is the incremental cost per case sociated with this special-order? 1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is currently producing and ling 10,000 cases per month? 2. What is the opportunity cost of not accepting the offer? 1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is currently operating at its fu pacity of 12,000 cases per month? 2. What is the opportunity cost of accepting the offer?
Sales price per case Wariable cost per case: Direct materials Direct labor Variable overhead & sales commissions Fixed costs per month 40 12 3 10 $ 60,000 Idwood Camps is a youth organization that serves hot chocolate at its camping facilities throughout Montana. The organization has ered Heavenly Treat $29 per case for a special-order batch of 1,000 cases. Each case would require a shrink-wrap covering cause of moisture problems associated with the organization's storage warehouses. The cost to shrink-wrap the order is estimated $3 per case. Selling costs associated with the order would be decreased by $1 per case because it would not include any sales mmissions. What is the normal incremental cost of producing and selling a case of hot chocolate? What is the incremental cost per case sociated with this special-order? 1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is currently producing and ling 10,000 cases per month? 2. What is the opportunity cost of not accepting the offer? 1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is currently operating at its fu pacity of 12,000 cases per month? 2. What is the opportunity cost of accepting the offer?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sales price per case
Variable cost per case:
%24
40
Direct materials
12
Direct labor
3
Variable overhead & sales commissions
10
Fixed costs per month
$ 60,000
Wildwood Camps is a youth organization that serves hot chocolate at its camping facilities throughout Montana. The organization has
offered Heavenly Treat $29 per case for a special-order batch of 1,000 cases. Each case would require a shrink-wrap covering
pecause of moisture problems associated with the organization's storage warehouses. The cost to shrink-wrap the order is estimated
at $3 per case. Selling costs associated with the order would be decreased by $1 per case because it would not include any sales
commissions.
a. What is the normal incremental cost of producing and selling a case of hot chocolate? What is the incremental cost per case
associated with this special-order?
p-1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is currently producing and
selling 10,000 cases per month?
p-2. What is the opportunity cost of not accepting the offer?
--1. What is the impact on monthly operating profit if the special order is accepted and Heavenly Treats is currently operating at its full
capacity of 12,000 cases per month?
=-2. What is the opportunity cost of accepting the offer?
a.
Incremental unit cost of creating a normal case
Incremental unit cost of creating a special-order case
b-1. Impact on operating profit
b-2. Opportunity cost
c-1. Impact on operating profit
c-2. Opportunity cost
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