Sunblocker Corp. makes several varieties of beach umbrellas and accessories. It has been approached about producing a special order for custom umbrellas. The special-order umbrellas with the Randolph Industries logo would be distributed to participants at an upcoming convention sponsored by Randolph.

Randolph has offered to buy 1,500 of the No-More-Squint (NMS) umbrellas at a price of \($8\) each. Sunblocker currently has the excess capacity necessary to accept the offer. The following information is related to the production of the NMS umbrella:

Required:

1. Determine the impact this special order would have on Sunblocker’s total profit.

2. Should Sunblocker accept the special order?

3. Suppose that the special offer had been to purchase 2,000 umbrellas for \($7.50\) each. What effect would the offer have on Sunblocker’s total profit?

4. Assume that Sunblocker is operating at full capacity. Determine the special-order price per unit at which Sunblocker would be indifferent to accepting the special order.

Transcribed Image Text:

Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost Regular sales price $ 2.25 0.75 3.50 2.50 $ 9.00 $19.00