Renella Company manufactures professional staplers and has been approached by a new customer with an offer...
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Renella Company manufactures professional staplers and has been approached by a new customer with an offer to purchase 20,000 staplers at a price of $10.00 per stapler. Providing the 20,000 staplers to the new customer will have no impact on Renella Company's present sales to its existing customers. Renella Company's production capacity for producing staplers is 100,000 staplers per year and Renella Company has budgeted sales of staplers next year to its existing customers to be 75,000 staplers. Renella Company's regular Sales Price for its staplers is $16.00 per stapler. The production cost per unit for Renella Company's staplers is as follows: Direct Materials $ 4.20 Direct Labor 3.60 Variable Manufacturing Overhead Fixed Manufacturing Overhead Total Production Cost Per Unit 1.80 2.10 $11.70 If Renella Company accepts the special order request, no Fixed Manufacturing Overhead Costs will be incurred since Renella Company has sufficient excess production capacity. Required 1. What are the alternatives for Renella Company in regards to the Special Order request? 2. Should Renella Company accept the special order and if accepted by how much will the Net Income (Operating Income) of Renella Company increase or decrease? 3. Briefly explain the importance of the statement that "Providing the 20,000 staplers to the new customer will have no impact on Renella Company's present sales to its existing customers". Renella Company manufactures professional staplers and has been approached by a new customer with an offer to purchase 20,000 staplers at a price of $10.00 per stapler. Providing the 20,000 staplers to the new customer will have no impact on Renella Company's present sales to its existing customers. Renella Company's production capacity for producing staplers is 100,000 staplers per year and Renella Company has budgeted sales of staplers next year to its existing customers to be 75,000 staplers. Renella Company's regular Sales Price for its staplers is $16.00 per stapler. The production cost per unit for Renella Company's staplers is as follows: Direct Materials $ 4.20 Direct Labor 3.60 Variable Manufacturing Overhead Fixed Manufacturing Overhead Total Production Cost Per Unit 1.80 2.10 $11.70 If Renella Company accepts the special order request, no Fixed Manufacturing Overhead Costs will be incurred since Renella Company has sufficient excess production capacity. Required 1. What are the alternatives for Renella Company in regards to the Special Order request? 2. Should Renella Company accept the special order and if accepted by how much will the Net Income (Operating Income) of Renella Company increase or decrease? 3. Briefly explain the importance of the statement that "Providing the 20,000 staplers to the new customer will have no impact on Renella Company's present sales to its existing customers".
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Related Book For
Cornerstones of Managerial Accounting
ISBN: 978-0176530884
2nd Canadian edition
Authors: Maryanne M. Mowen, Don Hanson, Dan L. Heitger, David McConomy, Jeffrey Pittman
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