Suppose a loyal customer requested to a special order to buy 100 units at $5.50 per unit. This is a one-time only order, the manufacturing company has the capacity to fill this order, and by filling the order no other regular order will go unfilled. Would you fill this order if you were the manager? Why? Is there an opportunity cost associated with this order? Explain. What would be the per-unit profit or loss for filling this order?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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  1. Suppose a loyal customer requested to a special order to buy 100 units at $5.50 per unit. This is a one-time only order, the manufacturing company has the capacity to fill this order, and by filling the order no other regular order will go unfilled.
  1. Would you fill this order if you were the manager? Why?
  2. Is there an opportunity cost associated with this order? Explain.
  3. What would be the per-unit profit or loss for filling this order?
Unit
Total
Cost of
Variable
Fixed
1000 Units
Manufacturing Cost
Cost
Cost
Per Unit
Total
750.00 S 0.75
$ 1,250.00 $ 1.25
400.00 S 0.40
$600 $ 0.60
250.00 $ 0.25
$250 $ 0.25
720.00 $ 0.72
Direct materials
0.75
$
Direct labor
$
1.25
Indirect labor
$
0.20
$200
Indirect material
$600
$ 0.10 $
Electricity
Factory Insurance
150
2$
$250
Other overhead
0.50 $
220
$
$ 4,220.00 $ 4.22
Total Manufacturing Costs
$ 2.80 $ 1,420.00
Administrative and Selling
Admin/Selling Expenses
1562
1562
1.562
Total Costs
$ 2.80 $ 2,982.00
$ 5,782.00 S 5.78
Transcribed Image Text:Unit Total Cost of Variable Fixed 1000 Units Manufacturing Cost Cost Cost Per Unit Total 750.00 S 0.75 $ 1,250.00 $ 1.25 400.00 S 0.40 $600 $ 0.60 250.00 $ 0.25 $250 $ 0.25 720.00 $ 0.72 Direct materials 0.75 $ Direct labor $ 1.25 Indirect labor $ 0.20 $200 Indirect material $600 $ 0.10 $ Electricity Factory Insurance 150 2$ $250 Other overhead 0.50 $ 220 $ $ 4,220.00 $ 4.22 Total Manufacturing Costs $ 2.80 $ 1,420.00 Administrative and Selling Admin/Selling Expenses 1562 1562 1.562 Total Costs $ 2.80 $ 2,982.00 $ 5,782.00 S 5.78
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