Assume the same information as for Problem 11-48, except that the $12 fixed manufacturing overhead consists of $8 per unit batch related costs and $4 per unit facilities level fixed costs. Also, assume that each new batch causes increased costs of $5,000 per batch; the remainder of the batch level costs consists of tools and supervision labor that do not vary with the number of batches. The remainder of fixed costs do not vary with the number of units produced or the number of batches.

Required

1. Calculate the relevant unit and total cost of the special order, including the new information about batch related costs.

2. If accepted, how would the special order affect GGI’s operating income?

 

Operating capacity (per month)			22,000	bags (100 lbs. each)
Current monthly production level			20,000	bags
Batch size			1,000	bags
Current number of batches per month			20	batches
Information regarding special order:
No. of bags (100lbs. Each)			5,000
Offering price (total sales revenue)			$125,000
One-time charge for the order			$2,000
Breakdown of $12 per unit fixed overhead cost:
Batch-related costs			$8.00
Facilities-level fixed ovherhead costs			$4.00
Incremental costs per batch			$5,000