Champion Ltd manufactures and sells trophies for sport events and other contests. Its manufacturing plant has...

 

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Champion Ltd manufactures and sells trophies for sport events and other contests. Its manufacturing plant has the capacity to produce 10,000 trophies each month. Current production and sales are 7,500 trophies per month. The company normally charges $150 per medal. Cost information for the current activity level is as follows: Variable costs Direct materials Direct manufacturing labour Variable Overhead costs for 150 batches @$500 each Fixed manufacturing costs Fixed marketing costs Total costs $262,500 300,000 75,000 275,000 175,000 1,087,500 Champion Ltd has just received one time only special order for 2,500 trophies at $100 per unit. Accepting the special order would not affect the company's existing customers. The current operation for its existing customers is in 50 trophies per batch (150 batches * 50 trophies per batch = 7,500 trophies). For the special order the company will make 100 unit per batch for 25 batches. Required (show all workings) (a) Should Champion Ltd accept this special order? Show your calculations. (b) As in requirement 1, assume that monthly capacity is 10,000 units. If the company accepts the special order and its existing customers immediately demand price discount $10 per trophy for the remaining capacity, should Champion Ltd accept the special order? Show your calculation. (25 marks) (25 marks) Champion Ltd manufactures and sells trophies for sport events and other contests. Its manufacturing plant has the capacity to produce 10,000 trophies each month. Current production and sales are 7,500 trophies per month. The company normally charges $150 per medal. Cost information for the current activity level is as follows: Variable costs Direct materials Direct manufacturing labour Variable Overhead costs for 150 batches @$500 each Fixed manufacturing costs Fixed marketing costs Total costs $262,500 300,000 75,000 275,000 175,000 1,087,500 Champion Ltd has just received one time only special order for 2,500 trophies at $100 per unit. Accepting the special order would not affect the company's existing customers. The current operation for its existing customers is in 50 trophies per batch (150 batches * 50 trophies per batch = 7,500 trophies). For the special order the company will make 100 unit per batch for 25 batches. Required (show all workings) (a) Should Champion Ltd accept this special order? Show your calculations. (b) As in requirement 1, assume that monthly capacity is 10,000 units. If the company accepts the special order and its existing customers immediately demand price discount $10 per trophy for the remaining capacity, should Champion Ltd accept the special order? Show your calculation. (25 marks) (25 marks)

Answer rating: 100% (QA)

a Evaluation of Special order Total 2500 Total special order units Sales revenue 1... View the full answer