Waterways mass-produces a special connector unit that it normally sells for $3.60. It sells approximately 31,700 of these units each year. The variable costs for each unit are $2.10. A company in Canada that has been unable to produce enough of a similar connector to meet customer demand would like to buy 16,500 of these units at $2.40 per unit. The production of these units is near full capacity at Waterways, so to accept the offer from the Canadian company would require temporarily adding another shift to its production line. To do this would increase variable manufacturing costs by $0.30 per unit. However, variable selling costs would be reduced by $0.20 a unit. An irrigation company has asked for a special order of 2,100 of the connectors. To meet this special order, Waterways would not need an additional shift, and the irrigation company is willing to pay $
Waterways mass-produces a special connector unit that it normally sells for $3.60. It sells approximately 31,700 of these units each year. The variable costs for each unit are $2.10. A company in Canada that has been unable to produce enough of a similar connector to meet customer demand would like to buy 16,500 of these units at $2.40 per unit. The production of these units is near full capacity at Waterways, so to accept the offer from the Canadian company would require temporarily adding another shift to its production line. To do this would increase variable manufacturing costs by $0.30 per unit. However, variable selling costs would be reduced by $0.20 a unit. An irrigation company has asked for a special order of 2,100 of the connectors. To meet this special order, Waterways would not need an additional shift, and the irrigation company is willing to pay $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Waterways mass-produces a special connector unit that it normally sells for $3.60. It sells approximately 31,700 of these units each year. The variable costs for each unit are $2.10. A company in Canada that has been unable to produce enough of a similar connector to meet customer demand would like to buy 16,500 of these units at $2.40 per unit. The production of these units is near full capacity at Waterways, so to accept the offer from the Canadian company would require temporarily adding another shift to its production line. To do this would increase variable
An irrigation company has asked for a special order of 2,100 of the connectors. To meet this special order, Waterways would not need an additional shift, and the irrigation company is willing to pay $3.00 per unit.
Transcribed Image Text:Your answer is partially correct.
What would be the consequences of accepting both special orders?
Accepting both special orders would
increase
net income by $
Transcribed Image Text:Your answer is partially correct.
What are the consequences of Waterways agreeing to provide the 16,500 units to the Canadian company? Would this be a wise
"special order" to accept?
Waterways should
*| accept the special order because net income increases by $
Your answer is partially correct.
Should Waterways accept the special order from the irrigation company?
Waterways should
accept the special order because net income increases
by $
%24
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