Sato Awards has had a request for a special order of 10 silver-plated trophies from the provincial tennis association. The normal selling price of such a trophy is $348.80 and its unit product cost is $218.00, as shown below: Direct materials Direct labour Manufacturing overhead Unit product cost Most of the manufacturing overhead is fixed and unaffected by variations in how many trophies are produced in any given period However, $7 of the overhead is variable, depending on the number of trophies produced. The customer would like a special fogo applied to the trophies requiring additional materials costing $6 pet trophy and would also require ocquisition of a special tool costing $390 that would have no other use once the special order was completed. This order would have no effect on the company's regular sales, and the order could be filled using the company's existing capacity without affecting any other order. Required: e. What effect would accepting this order have on the company's operating income if a special price of $313.80 is offered per trophy for this order? (Do not round intermediate calculations. Ro nd your answer to 2 decimal places) Net operating income $118.00 72.00 28.00 $218.00 b. Should the special order Yes No accepted at this price?
Sato Awards has had a request for a special order of 10 silver-plated trophies from the provincial tennis association. The normal selling price of such a trophy is $348.80 and its unit product cost is $218.00, as shown below: Direct materials Direct labour Manufacturing overhead Unit product cost Most of the manufacturing overhead is fixed and unaffected by variations in how many trophies are produced in any given period However, $7 of the overhead is variable, depending on the number of trophies produced. The customer would like a special fogo applied to the trophies requiring additional materials costing $6 pet trophy and would also require ocquisition of a special tool costing $390 that would have no other use once the special order was completed. This order would have no effect on the company's regular sales, and the order could be filled using the company's existing capacity without affecting any other order. Required: e. What effect would accepting this order have on the company's operating income if a special price of $313.80 is offered per trophy for this order? (Do not round intermediate calculations. Ro nd your answer to 2 decimal places) Net operating income $118.00 72.00 28.00 $218.00 b. Should the special order Yes No accepted at this price?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sato Awards has had a request for a special order of 10 silver-plated trophies from the provincial tennis association. The normal selling
price of such a trophy is $348.80 and its unit product cost is $218.00, as shown below:
Direct materials
Direct labour
Manufacturing overhead
Unit product cost
Most of the manufacturing overhead is fixed and unaffected by variations in how many trophies are produced in any given period
However, $7 of the overhead is variable, depending on the number of trophies produced. The customer would like a special fogo
applied to the trophies requiring additional materials costing $6 per trophy and would also require acquisition of a special tool casting
$390 that would have no other use once the special order was completed. This order would have no effect on the company's regular
sales, and the order could be filled using the company's existing capacity without affecting any other order.
$118.00
72.00
28.00
$218.00
Required:
a. What effect would accepting this order have on the company's operating income if a special price of $313.80 is
for this order? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Net operating income.
b. Should the special order be accepted at this price?
Yes
No
ered per trophy
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