Given Data PA07-01: 2 3 MOHAVE CORP. 4 5 Special order units 6 Special order unit sales price 1,500 $ 11.00 7 8 Production information: 9 Direct materials $ 5.00 10 Direct labor 2.00 11 Variable manufacturing overhead 3.50 12 Fixed manufacturing overhead 2.50 13 Total cost 13.00 14 15 Regular sales price 19.00 16 17 Additional Information for Requirement 3: 18 Special order units 19 Special order unit sales price 2 $ 9.00 20 21 2232 24 222222222 25 26 27 28 29 30 31 32 Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine. Lost Mine has offered to buy 1.500 of the US umbrellas at a price of $11 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella: 33 34 35 36 1. Compute the incremental profit (or loss) from accepting the special order. 2. Should Mohave accept the special order? 3. Suppose that the special order had been to purchase 2,000 umbrellas for $9.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario. 4. Assume that Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order. 2 3 4 Student Name: Class: Problem 07-01 MOHAVE CORP. 5 6 7 8 9 Requirement 1: Incremental revenue 10 Incremental variable cost 11 Incremental profit 12 13 14 Requirement 2: 15 16 17 18 19 20 21 22 23 Requirement 3: 24 25 Incremental revenue 26 Incremental variable cost 27 Incremental loss 28 29 30 Requirement 4: 31 32 33 34 35 36 37 38