Winner's Circle Inc., manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10,000 medals each month. Current monthly production is 7,500 medals. The company normally charges $175 per medal. Variable costs and fixed costs for the current activity level of 75 percent of capacity are as follows: Variable costs: Manufacturing Direct labor $375,000 Direct material $262,500 Marketing $187,500 Total variable costs $825,000 Fixed Costs: Manufacturing $275,000 Marketing $175,000 Total fixed costs $450,000 Total costs ( variable+fixed) $1,275,000 Unit costs: Variable cost per unit $110 Fixed cost per unit $60 Average unit cost $170 Winner's Circle has just received a special one-time order for 2,500 medals at $100 per medal. For this particular order, no variable marketing costs will be incurred. Cathy Donato, a management accountant with Winner's Circle, has been assigned the task of analyzing this order and recommending whether the company should accept or reject it. Should the company accept or reject the special order? What happens when the price of the medals goes from $175 to $170?
Winner's Circle Inc., manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10,000 medals each month. Current monthly production is 7,500 medals. The company normally charges $175 per medal. Variable costs and fixed costs for the current activity level of 75 percent of capacity are as follows: Variable costs: Manufacturing Direct labor $375,000 Direct material $262,500 Marketing $187,500 Total variable costs $825,000 Fixed Costs: Manufacturing $275,000 Marketing $175,000 Total fixed costs $450,000 Total costs ( variable+fixed) $1,275,000 Unit costs: Variable cost per unit $110 Fixed cost per unit $60 Average unit cost $170 Winner's Circle has just received a special one-time order for 2,500 medals at $100 per medal. For this particular order, no variable marketing costs will be incurred. Cathy Donato, a management accountant with Winner's Circle, has been assigned the task of analyzing this order and recommending whether the company should accept or reject it. Should the company accept or reject the special order? What happens when the price of the medals goes from $175 to $170?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Winner's Circle Inc., manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10,000 medals each month. Current monthly production is 7,500 medals. The company normally charges $175 per medal. Variable costs and fixed costs for the current activity level of 75 percent of capacity are as follows:
Variable costs:
| Manufacturing | |
| Direct labor | $375,000 |
| Direct material | $262,500 |
| Marketing | $187,500 |
| Total variable costs | $825,000 |
Fixed Costs:
| Manufacturing | $275,000 |
| Marketing | $175,000 |
| Total fixed costs | $450,000 |
| Total costs ( variable+fixed) | $1,275,000 |
Unit costs:
| Variable cost per unit | $110 |
| Fixed cost per unit | $60 |
| Average unit cost | $170 |
Winner's Circle has just received a special one-time order for 2,500 medals at $100 per medal. For this particular order, no variable marketing costs will be incurred. Cathy Donato, a
Should the company accept or reject the special order? What happens when the price of the medals goes from $175 to $170?
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