The Reward One Company manufactures windows. Its manufacturing plant has the capacity to produce 12,000 windows each month. Current production and sales are 10,000 windows per month. The company normally charges $250 per window. Requirement 1. Should Reward One accept this special order? Show your calculations. Begin by completing an analysis, and start by showing the computation of the company's operating income without the special order. Next, calculate operating income with the special order, and then calculate the differences between the two columns. (Complete all input fields. For amounts with no change, make sure to enter "0" in the appropriate cells of the Difference column.) Variable costs that vary with number of units produced Direct materials $600,000 Direct manufacturing labor 700,000 Variable costs (for setups, materials handling, quality control, and so on) that vary with number of batches, 100 batches × $1,500 per batch 150,000 Fixed manufacturing costs 250,000 Fixed marketing costs 400,000 Total costs $2,100,000 Reward One has just received a special one-time-only order for 2,000 windows at $225 per window. Accepting the special order would not affect the company's regular business or its fixed costs. Reward One makes windows for its existing customers in batch sizes of 100 windows (100 batches × 100 windows per batch = 10,000 windows). The special order requires Reward One to make the windows in 25 batches of 80 windows.

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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The

Reward One

Company manufactures windows. Its manufacturing plant has the capacity to produce

12,000

windows each month. Current production and sales are

10,000

windows per month. The company normally charges

$250 per window.

Requirement 1. Should

Reward One

accept this special order? Show your calculations.

Begin by completing an analysis, and start by showing the computation of the company's operating income without the special order. Next, calculate operating income with the special order, and then calculate the differences between the two columns. (Complete all input fields. For amounts with no change, make sure to enter "0" in the appropriate cells of the Difference column.)

Variable costs that vary with number of units produced
Direct materials	$600,000
Direct manufacturing labor	700,000
Variable costs (for setups, materials handling, quality control, and so on) that vary with number of batches, 100 batches × $1,500 per batch	150,000
Fixed manufacturing costs	250,000
Fixed marketing costs	400,000
Total costs	$2,100,000

Reward One

has just received a special one-time-only order for

2,000

windows at

$225

per window. Accepting the special order would not affect the company's regular business or its fixed costs.

Reward One

makes windows for its existing customers in batch sizes of

100

windows

(100

batches ×

100

windows per batch =

10,000

windows). The special order requires

Reward One

to make the windows in

batches of

windows.

Variable costs:
Direct materials
600000
120000
Direct manufacturing labor
700000
140000
Batch manufacturing costs
150000
37500
Fixed costs:
Fixed manufacturing costs
250000
400000
Fixed marketing costs
Total costs
400000
152500
Operating income
Based on the above calculations, Reward One should
the one-time only special order if it has no long-term
implications because accepting the order
| operating income by

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