Kneller Co. manufactures and sells medals for winners in track and field and other events. Its manufacturing
Question:
Kneller Co. manufactures and sells medals for winners in track and field and other events. Its manufacturing plant has the capacity to produce 23,000 medals each month; the current monthly production is 10,000 medals. The company normally charges $82 per medal. The cost data for the current level of production is shown below:
Variable costs: | ||
Direct materials | ps | 397,500 |
Direct labour | ps | 127,200 |
sales and administrative | ps | 20,600 |
Fixed costs: | ||
Manufacturing | ps | 118,800 |
sales and administrative | ps | 65,000 |
The company just received a special one-time order of 400 medals at $63 each. For this particular order, no variable selling or administrative costs would be incurred. This order would also have no effect on fixed costs. Assume that direct labor is a variable cost.
Required:
Should the company accept this special request?Explain your reasoning.
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ