Wayflaire Inc. produces home products. The cost to manufacture a case ( 36 sets) of its most popular set of casual dinnerware is as follows:

The average sales price for a case of dinnerware is \(\$ 3,300\). The company was approached by a potential customer that wanted to purchase an order of 5 cases for a specific catering event. The potential customer suggested a price of \(\$ 2,100\) per case for this special order.

a. What costs are relevant to the decision to accept this special order?

b. What would be the dollar effect on pre-tax income if this order was accepted, assuming that the company had the capacity to manufacture the additional 5 cases?

c. What would be the dollar effect on pre-tax income if this order was accepted, assuming that the company did not have the capacity to manufacture the additional 5 cases? Assume that the company had to forego 5 cases of normal sales to supply the special order.

Transcribed Image Text:

Direct material 600 Direct labor.... 430 Variable overhead 560 Fixed overhead. 675 Total $2,265