1. Jacob Fabrics manufactures quality both towels at its highly automated plant. The plant has a...

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1. Jacob Fabrics manufactures quality both towels at its highly automated plant. The plant has a production capacity of 48,000 towels each month. Current monthly production is 30,000 towels. The manufacturing costs per unit consist of the following : Variable cost($) 6.00 Fixed cost ($) Total cost ($) Direct materials Direct manufacturing labour 0.50 Manufacturing overhead Manufacturing costs 6.00 1.5 2.00 1.00 3.00 4.00 7.50 4.50 12.00 The marketing costs per unit are $7($5 of which is variable). As a result of a strike at its existing towel supplier, a luxury hotel chain has offered to buy 5,000 towels from Jacob Fabrics at $11 per towel. No subsequent sales to this customer are anticipated. Fixed manufacturing costs are tied to the 48,000 towel production capacity. The acceptance of this special order is not expected to affect the selling price or the quantity of towels sold to regular customers. Should Jacob accept the hotel chain's offer? 1. Jacob Fabrics manufactures quality both towels at its highly automated plant. The plant has a production capacity of 48,000 towels each month. Current monthly production is 30,000 towels. The manufacturing costs per unit consist of the following : Variable cost($) 6.00 Fixed cost ($) Total cost ($) Direct materials Direct manufacturing labour 0.50 Manufacturing overhead Manufacturing costs 6.00 1.5 2.00 1.00 3.00 4.00 7.50 4.50 12.00 The marketing costs per unit are $7($5 of which is variable). As a result of a strike at its existing towel supplier, a luxury hotel chain has offered to buy 5,000 towels from Jacob Fabrics at $11 per towel. No subsequent sales to this customer are anticipated. Fixed manufacturing costs are tied to the 48,000 towel production capacity. The acceptance of this special order is not expected to affect the selling price or the quantity of towels sold to regular customers. Should Jacob accept the hotel chain's offer?

Answer rating: 100% (QA)

Yes Jacob should accept the offer of the hotel for it will result t... View the full answer