Exercise 4-26 (Algo) Special Orders (LO 4-1, 2) Rowe Tool and Die (RTD) produces metal fittings...

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Exercise 4-26 (Algo) Special Orders (LO 4-1, 2) Rowe Tool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the forecasted Income statement for the next quarter, which is the typical planning horizon used at RTD. RTD expects to sell 57,000 units during the quarter. RTD carries no Inventories. Sales revenue Costs of fitting produced Gross profit Administrative costs Operating profit Amount $ 1,687,200 1,276,800 $ 410,400 296,400 $ 114,000 Per Unit $ 29.60 22.40 $ 7.20 5.20 $ 2.00 Fixed costs included in this Income statement are $370,500 for depreciation on plant and machinery and miscellaneous factory operations and $100,500 for administrative costs. RTD has received a request for 10,000 fittings to be produced in the next quarter from Endicott Manufacturing. Endicott has never purchased from RTD, although they have been a local company for many years. Endicott has offered to pay $21.20 per unit. RTD can easily produce the 10,000 units with its existing capacity. Production of the 10,000 units will incur all variable manufacturing costs but no fixed manufacturing costs. No administrative costs will be incurred because of the order. Required: a. What Impact would accepting this special order have on operating profit? b. Should RTD accept the order? Complete this question by entering your answers in the tabs below. Required A Required B What impact would accepting this special order have on operating profit? (Enter your answers in thousands rounded to 1 decimal place. (i.e., 5,400,400 should be entered as 5,400.4). Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Costs and Revenues (Thousands of Dollars) Status Quo 57,000 Units Alternative 67,000 Units Sales revenue Variable costs: S 1,687.2 Production Difference higher higher Administrative Contribution margin Fixed costs Operating profit higher higher 0 none higher < Required A Required B > Exercise 4-26 (Algo) Special Orders (LO 4-1, 2) Rowe Tool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the forecasted Income statement for the next quarter, which is the typical planning horizon used at RTD. RTD expects to sell 57,000 units during the quarter. RTD carries no Inventories. Sales revenue Costs of fitting produced Gross profit Administrative costs Operating profit Amount $ 1,687,200 1,276,800 $ 410,400 296,400 $ 114,000 Per Unit $ 29.60 22.40 $ 7.20 5.20 $ 2.00 Fixed costs included in this Income statement are $370,500 for depreciation on plant and machinery and miscellaneous factory operations and $100,500 for administrative costs. RTD has received a request for 10,000 fittings to be produced in the next quarter from Endicott Manufacturing. Endicott has never purchased from RTD, although they have been a local company for many years. Endicott has offered to pay $21.20 per unit. RTD can easily produce the 10,000 units with its existing capacity. Production of the 10,000 units will incur all variable manufacturing costs but no fixed manufacturing costs. No administrative costs will be incurred because of the order. Required: a. What Impact would accepting this special order have on operating profit? b. Should RTD accept the order? Complete this question by entering your answers in the tabs below. Required A Required B What impact would accepting this special order have on operating profit? (Enter your answers in thousands rounded to 1 decimal place. (i.e., 5,400,400 should be entered as 5,400.4). Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Costs and Revenues (Thousands of Dollars) Status Quo 57,000 Units Alternative 67,000 Units Sales revenue Variable costs: S 1,687.2 Production Difference higher higher Administrative Contribution margin Fixed costs Operating profit higher higher 0 none higher < Required A Required B >

Answer rating: 100% (QA)

Required A To calculate the impact of accepting the special order on operating profit we need to com... View the full answer