Refer to the information for Smooth Move Company on the previous page. If SmoothMove accepts the order, no fixed manufacturing activities will be affected because there issufficient excess capacity.Required:1. What are the alternatives for Smooth Move?2. CONCEPTUAL CONNECTION Should Smooth Move accept the special order? By howmuch will profit increase or decrease if the order is accepted?3. CONCEPTUAL CONNECTION Briefly explain the significance of the statement in theexercise that “existing sales will not be affected” (by the special sale). Smooth Move Company manufactures professional paperweights and has been ap-proached by a new customer with an offer to purchase 15,000 units at a per-unit price of$7.00. The new customer is geographically separated from Smooth Move's other custom-ers, and existing sales will not be affected. Smooth Move normally produces 82,000 unitsbut plans to produce and sell only 65,000 in the coming year. The normal sales price is $12per unit. Unit cost information is as follows:Direct materials$3.10Direct labor2.25Variable overhead1.15Fixed overhead1.80Total$8.30

For analysis of special order, incremental revenues and incremental expenses are calculated for…

Answered: Smooth Move Company manufactures…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Refer to the information for Smooth Move Company on the previous page. If Smooth
Move accepts the order, no fixed manufacturing activities will be affected because there is
sufficient excess capacity.
Required:
1. What are the alternatives for Smooth Move?
2. CONCEPTUAL CONNECTION Should Smooth Move accept the special order? By how
much will profit increase or decrease if the order is accepted?
3. CONCEPTUAL CONNECTION Briefly explain the significance of the statement in the
exercise that “existing sales will not be affected” (by the special sale).

Smooth Move Company manufactures professional paperweights and has been ap-
proached by a new customer with an offer to purchase 15,000 units at a per-unit price of
$7.00. The new customer is geographically separated from Smooth Move's other custom-
ers, and existing sales will not be affected. Smooth Move normally produces 82,000 units
but plans to produce and sell only 65,000 in the coming year. The normal sales price is $12
per unit. Unit cost information is as follows:
Direct materials
$3.10
Direct labor
2.25
Variable overhead
1.15
Fixed overhead
1.80
Total
$8.30

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