Question

Flamingos to Go is a service company owned by Irvin Vonnet that will “plant” plastic flamingos on a special day in people’s yards to help celebrate and advertise birthdays, births, anniversaries, and other important milestones. The average delivery is priced at $65.The costs of providing 775 deliveries in the past year were:
Direct labor ....................... $12,400
Variable overhead..................... 8,525
Fixed overhead (advertising costs, phone service, and insurance). 17,000
Total cost......................... $37,925
At the start of the current year, lrv received a phone call from the local Rotary club. The club would like to contract with Flamingos to Co to have flamingos delivered to the yards of each of its member in the upcoming year; this contract would provide an additional 130 deliveries for Flamingos to Co. However, the club wants a special price since it is ordering a large number of deliveries; it has said it would like a price of $55 per delivery. Flamingos to go can make up to 1,000 deliveries per year without incurring additional fixed costs.

Required
What will be the affect on profit if lrv accepts the special order?



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  • CreatedSeptember 23, 2013
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