Golda Company has a maximum capacity to produce 24 000 bath towels per month. The unit...

 

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Golda Company has a maximum capacity to produce 24 000 bath towels per month. The unit cost is as follows: Direct material cost: $5.50 Direct Labour cost: $6.40 Fixed Manufacturing overhead: $3 Variable manufacturing overhead: $1.10 Currently it produces and sells 20 000 units to its regular customers for $20. Firth Limited has approached Golda Company with a business proposal to supply them with 3000 towels at a special price of $15 per towel. Required: 1. Should Golda Company accept this business proposal? Show all calculations. (2 marks) 2. If the business proposal is for 10 000 units, should it be accepted? Show all calculations. (2 marks) 3. What other strategic issues should be considered in making the decisions whether to accept or reject a special order (2 marks) Golda Company has a maximum capacity to produce 24 000 bath towels per month. The unit cost is as follows: Direct material cost: $5.50 Direct Labour cost: $6.40 Fixed Manufacturing overhead: $3 Variable manufacturing overhead: $1.10 Currently it produces and sells 20 000 units to its regular customers for $20. Firth Limited has approached Golda Company with a business proposal to supply them with 3000 towels at a special price of $15 per towel. Required: 1. Should Golda Company accept this business proposal? Show all calculations. (2 marks) 2. If the business proposal is for 10 000 units, should it be accepted? Show all calculations. (2 marks) 3. What other strategic issues should be considered in making the decisions whether to accept or reject a special order (2 marks)

Answer rating: 100% (QA)

To determine whether Golda Company should accept the business proposal we need to compare the releva... View the full answer