Snapper Tool Company has plenty of excess capacity to accept a special order. Shown below is an "what-if" analysis of the special order. Which of the following is the correct decision and reason? Status Quo With Special Order Sales $128,000 $133,000 variable costs: Manufacturing 51,200 54,400 Selling and administrative 25,600 26,600 Contribution margin $51,200 $52,000 Fixed cost 19,200 19,200 Operating profit $32,000 $32,800 A) Yes, since the goal is to fill capacity as much as possible to keep fixed overhead variances as low as possible. B) No, the company will only break even. C) No, since only the employees will benefit from this in that they will earn more overtime. D) Yes, since operating profits will most likely increase
Snapper Tool Company has plenty of excess capacity to accept a special order. Shown below is an "what-if" analysis of the special order. Which of the following is the correct decision and reason? Status Quo With Special Order Sales $128,000 $133,000 variable costs: Manufacturing 51,200 54,400 Selling and administrative 25,600 26,600 Contribution margin $51,200 $52,000 Fixed cost 19,200 19,200 Operating profit $32,000 $32,800 A) Yes, since the goal is to fill capacity as much as possible to keep fixed overhead variances as low as possible. B) No, the company will only break even. C) No, since only the employees will benefit from this in that they will earn more overtime. D) Yes, since operating profits will most likely increase
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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3. Snapper Tool Company has plenty of excess capacity to accept a special order. Shown below is an "what-if" analysis of the special order. Which of the following is the correct decision and reason?
Status Quo With Special Order
Sales $128,000 $133,000
variable costs:
Manufacturing 51,200 54,400
Selling and administrative 25,600 26,600
Contribution margin $51,200 $52,000
Fixed cost 19,200 19,200
Operating profit $32,000 $32,800
A) Yes, since the goal is to fill capacity as much as possible to keep fixed overhead variances as low as possible.
B) No, the company will only break even.
C) No, since only the employees will benefit from this in that they will earn more overtime.
D) Yes, since operating profits will most likely increase.
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