Cambridge Lock Company's normal price for their padlocks is $9.50 per lock. They received a special request
Question:
Cambridge Lock Company's normal price for their padlocks is $9.50 per lock. They received a special request from BigBox Hardware requesting 2,500 locks at a price of $7.00 each. Cambridge's factory capacity can accommodate the manufacturing of 10,000 locks per month, and their current monthly sales are 6,000 locks. Cambridge also obtained the following information: Fixed Manufacturing Costs at capacity of $25,000, additional Selling and Administrative Costs for the special order of $500, and Total Variable Costs per lock are $6.25. Should Cambridge Lock accept or reject the special order, and why should they either accept or reject it? a.) Cambridge should reject the special order. They will lose $1,375 by accepting the order. b.) Cambridge should accept the special order. They will gain $1,375 in profit from the special order. c.) Cambridge should reject the special order. They will lose $8,125 by accepting the order. d.) Cambridge should accept the special order. They will gain $8,125 in profit from the special order.
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher