As a reminder, the Lawn Mower Division is currently producing at only 70% capacity. Home Depot...
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As a reminder, the Lawn Mower Division is currently producing at only 70% capacity. Home Depot recently requested 50 additional EGO lawn mowers. The normal sale price for EGO lawn mowers is $549, yet Home Depot has offered only $400 each. Further, assume that in order to meet the spike in demand, Green Lawn Corp. must pay a special order fee of $600 to its main supplier, Supplier Corp. for the extra lawn mowers. Jake said that he was considering rejecting the special order due to the unprofitability of the lawn mower division and the incremental special order fee. Using the relevant information identified in the prior problem, complete the analysis below. Round to the nearest whole number and do not use decimals. Step 1: Calculate all of the per unit costs. Cost Data (per unit) Direct Materials Direct Labor Variable Overhead Fixed Overhead Sales Commission* Available Capacity Special Order Fee *2.5% of sales price Step 2: Assess if there is enough available capacity to accept the special order. The total production capacity for the lawn mower division is 167 units and it is operating at 70% capacity. Sales Price / unit Special Order Quantity Step 3: Analyze the special order contribution margin per unit and in total. Costs/unit CM$ / unit $40 $84 # units sold $25 $35 Total CM $ Note the available capacity and overall contribution margin. You will report these values to your manager in the next step after reviewing the feedback for this problem. As a reminder, the Lawn Mower Division is currently producing at only 70% capacity. Home Depot recently requested 50 additional EGO lawn mowers. The normal sale price for EGO lawn mowers is $549, yet Home Depot has offered only $400 each. Further, assume that in order to meet the spike in demand, Green Lawn Corp. must pay a special order fee of $600 to its main supplier, Supplier Corp. for the extra lawn mowers. Jake said that he was considering rejecting the special order due to the unprofitability of the lawn mower division and the incremental special order fee. Using the relevant information identified in the prior problem, complete the analysis below. Round to the nearest whole number and do not use decimals. Step 1: Calculate all of the per unit costs. Cost Data (per unit) Direct Materials Direct Labor Variable Overhead Fixed Overhead Sales Commission* Available Capacity Special Order Fee *2.5% of sales price Step 2: Assess if there is enough available capacity to accept the special order. The total production capacity for the lawn mower division is 167 units and it is operating at 70% capacity. Sales Price / unit Special Order Quantity Step 3: Analyze the special order contribution margin per unit and in total. Costs/unit CM$ / unit $40 $84 # units sold $25 $35 Total CM $ Note the available capacity and overall contribution margin. You will report these values to your manager in the next step after reviewing the feedback for this problem.
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Related Book For
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
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