Special Order, Traditional Analysis Fiorello Company manufactures two types of cold-pressed olive oil, Refined Oil and Top Quality Oil, out of a joint process. The joint (common) costs incurred are $87,250 for a standard production run that generates 30,600 gallons of Refined Oil and 15,300 gallons of Top Quality Oil Additional processing costs beyond the split-off point are $2.35 per gallon for Refined Oil and $2.00 per gallon for Top Quality Oil. Refined Oil sells for $4.10 per gallon, while Top Quality Oil sells for $8.20 per gallon. MangiareBuono, a supermarket chain, has asked Fiorello to supply it with 30,600 gallons of Top Quality Oil at a price of $8 per gallon. MangiareBuono plans to have the oil bottled in 16-ounce bottles with its own MangiareBuono label. If Fiorello accepts the order, it will save $0.22 per gallon in packaging of Top Quality Oil. There is sufficient excess capacity for the order. However, the market for Refined Oil is saturated, and any additional sales of Refined Oil would take place at a price of $3.11 per gallon. Assume that no significant non-unit-level activity costs are incurred. Required: 1. What is the profit normally earned on one production run of Refined Oil and Top Quality Oil? 2. Should Fiorello accept the special order? Yes No
Special Order, Traditional Analysis Fiorello Company manufactures two types of cold-pressed olive oil, Refined Oil and Top Quality Oil, out of a joint process. The joint (common) costs incurred are $87,250 for a standard production run that generates 30,600 gallons of Refined Oil and 15,300 gallons of Top Quality Oil Additional processing costs beyond the split-off point are $2.35 per gallon for Refined Oil and $2.00 per gallon for Top Quality Oil. Refined Oil sells for $4.10 per gallon, while Top Quality Oil sells for $8.20 per gallon. MangiareBuono, a supermarket chain, has asked Fiorello to supply it with 30,600 gallons of Top Quality Oil at a price of $8 per gallon. MangiareBuono plans to have the oil bottled in 16-ounce bottles with its own MangiareBuono label. If Fiorello accepts the order, it will save $0.22 per gallon in packaging of Top Quality Oil. There is sufficient excess capacity for the order. However, the market for Refined Oil is saturated, and any additional sales of Refined Oil would take place at a price of $3.11 per gallon. Assume that no significant non-unit-level activity costs are incurred. Required: 1. What is the profit normally earned on one production run of Refined Oil and Top Quality Oil? 2. Should Fiorello accept the special order? Yes No
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Special Order, Traditional Analysis
Fiorello Company manufactures two types of cold-pressed olive oil, Refined Oil and Top Quality Oil, out of a joint process. The joint (common) costs incurred are $87,250 for a standard production run that generates 30,600 gallons of Refined Oil and 15,300 gallons of Top Quality Oil
Additional processing costs beyond the split-off point are $2.35 per gallon for Refined Oil and $2.00 per gallon for Top Quality Oil. Refined Oil sells for $4.10 per gallon, while Top Quality Oil sells for $8.20 per gallon.
MangiareBuono, a supermarket chain, has asked Fiorello to supply it with 30,600 gallons of Top Quality Oil at a price of $8 per gallon. MangiareBuono plans to have the oil bottled in 16-ounce bottles with its own MangiareBuono label.
If Fiorello accepts the order, it will save $0.22 per gallon in packaging of Top Quality Oil. There is sufficient excess capacity for the order. However, the market for Refined Oil is saturated, and any additional sales of Refined Oil would take place at a price of $3.11 per gallon. Assume that
no significant non-unit-level activity costs are incurred.
Required:
1. What is the profit normally earned on one production run of Refined Oil and Top Quality Oil?
2. Should Fiorello accept the special order?
Yes
No
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