Carpal Company manufactures a state of the art device to monitor arthritis. The company received a...

 

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Carpal Company manufactures a state of the art device to monitor arthritis. The company received a special order request for a modified device for a different industry where the technology could be useful. The customer has offered to purchase 32,000 units if the order can be completed within a month of the order. Cost information related to the current scanner is below. Direct Materials Direct Labour (.75 hours at $30 per hour) Variable overhead (.25 machine hours at $19 per hour) Fixed overhead (.25 machine hours at $45 per hour) 35.76 22.5 4.75 11.25 74.26 Additional information 1. The current selling price per unit is $80. The customer is offering to buy the device for $76 due to the large quanity they wish to purchase. 2. The current capacity is 40,000 machine hours. Carpal currently operates at 90% capacity. Required a) Calculate the number of regular units sold that would be lost by accepting this special order. b) Calculate the contribution margin per unit on this special order. C) Calculate the incremental income/loss from accepting the order. D) Would you recommend accepting the order? Explain why briefly with both qualitative and quantitative factors. Carpal Company manufactures a state of the art device to monitor arthritis. The company received a special order request for a modified device for a different industry where the technology could be useful. The customer has offered to purchase 32,000 units if the order can be completed within a month of the order. Cost information related to the current scanner is below. Direct Materials Direct Labour (.75 hours at $30 per hour) Variable overhead (.25 machine hours at $19 per hour) Fixed overhead (.25 machine hours at $45 per hour) 35.76 22.5 4.75 11.25 74.26 Additional information 1. The current selling price per unit is $80. The customer is offering to buy the device for $76 due to the large quanity they wish to purchase. 2. The current capacity is 40,000 machine hours. Carpal currently operates at 90% capacity. Required a) Calculate the number of regular units sold that would be lost by accepting this special order. b) Calculate the contribution margin per unit on this special order. C) Calculate the incremental income/loss from accepting the order. D) Would you recommend accepting the order? Explain why briefly with both qualitative and quantitative factors.

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