(a) Assume the customer requests 215 units in the special order and offers $45 per unit. Since the customer came directly to the company, no variable selling cost will be incurred. How much better or worse off will Systems Industries be if it accepts this special order, assuming it has enough idle capacity for the order?

(b) Assume instead the customer requests 145 units and both a discounted price of $45 per unit and a customized version of the fan. In order to make the customized version, Systems Industries will need to purchase a special piece of equipment for $3,030, but it will not incur any variable selling costs for this order. How much better or worse off will the company be if it uses its available capacity and accepts this special order?

Transcribed Image Text:

The management team of Systems Industries was evaluating its performance for the first half of the year. Production and sales of its fans were on budget at 2,800 units to date, with the following income statement reflecting its income for the first half of the year. Sales. $229,600 Variable Costs: DM $42,000 DL. $30,800 Variable-MOH. $8,400 Variable Selling. $8,400. $89,600 Contribution Margin. $140,000 Fixed Costs: Fixed-MOH. $36,000 Fixed Selling. $101,000. $137,000 Operating Income (Loss). $3,000 Orders for the second half of the year were coming in slower than what the company had been expecting. When a new customer called and requested a special discount, the sales team listened. The management team of Systems Industries was evaluating its performance for the first half of the year. Production and sales of its fans were on budget at 2,800 units to date, with the following income statement reflecting its income for the first half of the year. Sales. $229,600 Variable Costs: DM $42,000 DL. $30,800 Variable-MOH. $8,400 Variable Selling. $8,400. $89,600 Contribution Margin. $140,000 Fixed Costs: Fixed-MOH. $36,000 Fixed Selling. $101,000. $137,000 Operating Income (Loss). $3,000 Orders for the second half of the year were coming in slower than what the company had been expecting. When a new customer called and requested a special discount, the sales team listened.

Answer rating: 100% (QA)

To determine how much better or worse off Systems Industries would be if it accepts either of the special orders we need to assess the incremental cos... View the full answer