Question

Greenview Corp. makes several varieties of wooden furniture. It has been approached about producing a special order for Wilderness rocking chairs. A local senior citizens group would use the special-order chairs in a newly remodeled activity center. The senior citizens group has offered to buy 80 of the Wilderness chairs at a price of $65 each. Greenview currently has the excess capacity necessary to accept the offer. A summary of the information related to production of Greenview’s Wilderness model follows:
Direct materials .......... $30
Direct labor ............ 22
Variable manufacturing overhead .... 12
Fixed manufacturing overhead ...... 11
Total cost .............. $75
Regular sales price ......... $99

Required:
1. Compute the incremental profit (or loss) from accepting the special order.
2. Should Greenview accept the special order?
3. Suppose that the special order had been to purchase 100 rocking chairs for $60 each. Re-compute the incremental profit (or loss) from accepting the special order.
4. Assume Greenview is operating at full capacity. Calculate the special-order price per unit at which Greenview would be indifferent between accepting or rejecting the special order.



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  • CreatedFebruary 27, 2015
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