Winner's Circle, Incorporated, manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 2,500 medals each month. Current monthly production is 1,875 medals. The company normally charges $515 per medal. Variable costs and fixed costs for the current activity level of 75 percent of capacity are as follows: Production Costs Variable costs: Manufacturing: Direct labor Direct material Marketing Total variable costs Fixed costs: Manufacturing Marketing Total fixed costs Total costs Variable cost per unit Fixed cost per unit Average unit cost $ 262,500 196,875 140,625 $ 600,000 $ 207,150 130,350 $ 337,500 $ 937,500 $ 320 180 $ 500 Winner's Circle has just received a special one-time order for 625 medals at $290 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. After examining the costs, Donato suggested to her supervisor, Gerard LePenn, who is the controller, that they request competitive bids from vendors for the raw material as the current quote seems high. LePenn Insisted that the prices are in line with other vendors and told her that she was not to discuss her observations with anyone else. Donato later discovered that LePenn Is a brother-in-law of the owner of the current raw-material supply vendor. 14-56 (Algo) Part 2: Compute both the new average unit cost and the incremental unit cost for the ecial order. Compute both the new average unit cost and the Incremental unit cost for the special order. Should Winner's Circle, Incorporated accept the special order?
Winner's Circle, Incorporated, manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 2,500 medals each month. Current monthly production is 1,875 medals. The company normally charges $515 per medal. Variable costs and fixed costs for the current activity level of 75 percent of capacity are as follows: Production Costs Variable costs: Manufacturing: Direct labor Direct material Marketing Total variable costs Fixed costs: Manufacturing Marketing Total fixed costs Total costs Variable cost per unit Fixed cost per unit Average unit cost $ 262,500 196,875 140,625 $ 600,000 $ 207,150 130,350 $ 337,500 $ 937,500 $ 320 180 $ 500 Winner's Circle has just received a special one-time order for 625 medals at $290 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. After examining the costs, Donato suggested to her supervisor, Gerard LePenn, who is the controller, that they request competitive bids from vendors for the raw material as the current quote seems high. LePenn Insisted that the prices are in line with other vendors and told her that she was not to discuss her observations with anyone else. Donato later discovered that LePenn Is a brother-in-law of the owner of the current raw-material supply vendor. 14-56 (Algo) Part 2: Compute both the new average unit cost and the incremental unit cost for the ecial order. Compute both the new average unit cost and the Incremental unit cost for the special order. Should Winner's Circle, Incorporated accept the special order?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Winner's Circle, Incorporated, manufactures medals for winners of athletic events and other contests. Its manufacturing
plant has the capacity to produce 2,500 medals each month. Current monthly production is 1,875 medals. The company
normally charges $515 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
Direct material
Marketing
Production Costs
Total variable costs.
Fixed costs:
Manufacturing
Marketing
Total fixed costs
Total costs
Variable cost per unit
Fixed cost per unit.
Average unit cost
$ 262,500
196,875
140,625
$ 600,000
$ 207,150
130,350
$ 337,500
$ 937,500
$ 320
180
$ 500
Winner's Circle has just received a special one-time order for 625 medals at $290 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. After
examining the costs, Donato suggested to her supervisor, Gerard LePenn, who is the controller, that they request
competitive bids from vendors for the raw material as the current quote seems high. LePenn Insisted that the prices are in
line with other vendors and told her that she was not to discuss her observations with anyone else. Donato later
discovered that LePenn is a brother-in-law of the owner of the current raw-material supply vendor.
PR 14-56 (Algo) Part 2: Compute both the new average unit cost and the incremental unit cost for the
special order.
New average unit cost
Incremental unit cost
2-a. Compute both the new average unit cost and the incremental unit cost for the special order.
2-b. Should Winner's Circle, Incorporated accept the special order?
Complete this question by entering your answers in the tabs below.
Req 2A
Req 28
Compute both the new average unit cost and the incremental unit cost for the special order.
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
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