Question

Berryhill Automotive Company manufactures an engine designed for motorcycles and markets the product using its own brand name. Although Berryhill has the capacity to produce 50,000 engines annually, it currently produces and sells only 30,000 units per year. The engine normally sells for $450 per unit, with no quantity discounts. The unit-level costs to produce the engine are $160 for direct materials, $150 for direct labor, and $30 for indirect manufacturing costs. Berryhill expects total annual product- and facility-level costs to be $540,000 and $750,000 respectively. Assume Berryhill receives a special order from a new customer seeking to buy 1,000 engines for $320 each.

Required
Should Berryhill accept or reject the special order? Support your answer with appropriate computations.



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  • CreatedFebruary 07, 2014
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