Annie\'s Homemades regular selling price is $5.00 per serving of ice cream. It has been approached by a wedding party who has offered to pay $856.00 (via credit card) for 240 pre-packaged servings of ice cream. The party would expect Annie\'s employees to remain at the wedding venue for two hours to serve the ice cream. From Annie\'s perspective, the total proceeds of $856.00, would be sub-divided as follows:

• Sales revenue = $800.00
• Sales tax (7% of gross sales) = $56.00

Annie\'s would cater the event with one manager, who is paid $15.00 per hour, and two additional employees who are each paid $8.00 per hour. The distance to the event is 25 miles each direction and the drive time is 60 minutes round-trip.

The company can fulfill the special order with its existing production capacity and would not have to sacrifice any other sales opportunities. It has gathered the following additional information to assist in making the decision:

Ingredient and packaging cost per serving	$ 1.50
Franchise fee	5%	of sales revenue
Credit card processing fee	3%	of total proceeds
Average time for manager to make one batch of 100 servings of ice cream	1.5	hours
Average time for hourly employee to pre-package one serving of ice cream	1	minute
Pickup truck diesel fuel, oil, and diesel exhaust fluid expenses	$0.60	per mile
Annual expenses:
Pickup truck depreciation, insurance, registration, and vehicle tax	$ 15,000
Manufacturing overhead (e.g., equipment depreciation, rent, utilities, insurance, etc.)	$ 85,000
Off-site sales equipment depreciation (e.g., trailer, mobile freezer and sales booth)	$ 3,000

Required:

1. For each item shown below, use the drop-down menu to categorize it as relevant or irrelevant in the decision to the accept or reject the special-order opportunity. For each item you categorize as relevant, insert the corresponding amount of the total incremental revenue or total incremental cost (use parentheses for all incremental costs). For each item you categorize as irrelevant, insert a zero in the Amount column.

1. Gross Sales
2. Sales Tax
3. Ingredients and packaging cost
4. franchise fee
5. credit card processing fee
6. catering labor (including drive time), manager
7. catering labor (including drive time), employees
8. pickup truck diesel fuel, oil, and diesel exhaust fluid expenses
9. production labor, manager
10. production labor, employees
11. annual expenses: pickup truck
12. annual expenses: manufacturing overhead
13. annual expenses: off-site sales equipment depreciation

2. What is the financial advantage (disadvantage) of accepting this order?

Answer rating: 100% (QA)

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