Company produces golf discs, which it normally sells to retailers for $12 each. The cost of manufacturing
Question:
Company produces golf discs, which it normally sells to retailers for $12 each. The cost of manufacturing 20,400 golf discs is:
Direct materials $11,016
Direct labour 29,988
Variable overhead 22,032
Fixed overhead 45,000
Total $108,036
Sheffield also incurs 5% sales commission ($0.60) on each disc sold. Cato Corporation offers Sheffield $7.20 per disc for 5,100 discs. imprinting machine. No sales commission will result from the special order. Cato would sell the discs under its own brand name in foreign markets not yet served by. If accepts the offer, it will incur a one-time fixed cost of $12,500 due to the rental of an imprinting machine. No sales commission will result from the special order. Required: (a) Provide your quantitative analysis for the special order. (b) Should the company accept the special order based on your quantitative analysis? Explain. (c) What other factors (qualitative factors) should the company consider before accepting the special order?
Managerial Accounting Tools for business decision making
ISBN: 978-0470477144
5th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso