Management Control SCO$-2000$

Statement $-$ TP$-3$

A One$-$Time Special Order

Florence is a young entrepreneur who owns a company that manufactures custom$-$made suits in downtown Montreal. Her company, Complets $$ votre go$$t $($CAVG$),$ specializes in making suits $($matching jacket and trousers$)$ from local, organic, and fair$-$trade materials.

A suit made by CAVG is currently sold for $\backslash (\backslash$$ $1,400\backslash ).$ The company manufactures $2,000$ suits per year, generating fixed annual manufacturing overhead costs of $\backslash (\backslash$$ $220,000\backslash ).$ The table below represents the unit cost of a suit:

Cost Breakdown:

$-$ Raw Materials: $\backslash$$$320$

$-$ Direct Labor $($MOD$)$: $270(9$h$30/$hour$)$

$-$ Variable Manufacturing Overhead: $90(10$h$10/$hour$)$

$-$ Fixed Manufacturing Overhead: $110(220,000\backslash (\backslash$div $2,000)\backslash )$

$-$ Total Unit Cost: $\backslash$$$790$

Additionally, the sale of each unit incurs variable selling and administrative expenses of $\backslash (\backslash$$ $50\backslash ).$

CAVG must also cover fixed annual selling and administrative expenses of $\backslash (\backslash$$ $100,000\backslash ).$

In addition to the $2,000$ suits it plans to sell this year, Florence recently received a one$-$time order from a luxury hotel in Old Montreal for the production of $200$ custom suits for its staff.

No additional fixed costs will be incurred for this order, and CAVG will not have to bear variable selling and administrative expenses, as the contract will be signed directly with the hotel, and staff members will pick up their suits at the company.

However, the hotel management has requested a special embroidery on the suits, increasing the material costs by $\backslash (\backslash$$ $25\backslash )$ per unit and adding $12$ minutes $(0\mathrm{.}20$ hours$)$ to the direct labor time required per suit.

Florence estimates that CAVG has ample production capacity to fulfill this one$-$time order.

The hotel management is offering Florence $\backslash (\backslash$$ $740\backslash )$ per suit.

Task:

Determine whether Florence should accept the hotel management's offer. Present all calculations that support your recommendation.

The assignment must be done in Excel in a professional format.

October $1,2024$