Razor USA produces a variety of electric scooters. Assume that Razor has just received an order...

 

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Razor USA produces a variety of electric scooters. Assume that Razor has just received an order from a customer (Pulse Cycles) for 750 Power Core scooters. The following price, based on cost plus a 60% markup, has been developed for the order: Manufacturing costs Direct materials Direct labor $17,775 12,750 Factory overhead 23,700 Total 54,225 Markup (60%) Selling price 32,535 $86,760 Pulse Cycles rejected this price and offered to purchase the 750 scooters at a price of $67,500. The following additional information is available: Razor has sufficient excess capacity to produce the scooters. Factory overhead is applied on the basis of direct labor dollars. Budgeted factory overhead is $12,000,000 for the current year. Of this amount, $9,000,000 is fixed. Of the $23,700 of factory overhead assigned to the Pulse Cycles order, only $5,925 is driven by the special order; $17,775 is a fixed cost. Selling and administrative expenses are budgeted as follows: Fixed: $4,500,000 per year Variable: $10 per unit manufactured and sold Required Note: Do not use negative signs with your answer. a. The president of Razor wants to know if he should allow Pulse Cycles to have the scooters for $67,500. Determine the effect on profits of accepting Pulse Cycles' offer. Increase of $ 5,775 b. Assume Razor is operating at capacity and could sell the 750 scooters at its regular markup. 1. Determine the opportunity cost of accepting Pulse Cycles' offer. $ 25,035 2. Determine the effect on profits of accepting Pulse Cycles' offer. Decrease of $ (19,260) x x Razor USA produces a variety of electric scooters. Assume that Razor has just received an order from a customer (Pulse Cycles) for 750 Power Core scooters. The following price, based on cost plus a 60% markup, has been developed for the order: Manufacturing costs Direct materials Direct labor $17,775 12,750 Factory overhead 23,700 Total 54,225 Markup (60%) Selling price 32,535 $86,760 Pulse Cycles rejected this price and offered to purchase the 750 scooters at a price of $67,500. The following additional information is available: Razor has sufficient excess capacity to produce the scooters. Factory overhead is applied on the basis of direct labor dollars. Budgeted factory overhead is $12,000,000 for the current year. Of this amount, $9,000,000 is fixed. Of the $23,700 of factory overhead assigned to the Pulse Cycles order, only $5,925 is driven by the special order; $17,775 is a fixed cost. Selling and administrative expenses are budgeted as follows: Fixed: $4,500,000 per year Variable: $10 per unit manufactured and sold Required Note: Do not use negative signs with your answer. a. The president of Razor wants to know if he should allow Pulse Cycles to have the scooters for $67,500. Determine the effect on profits of accepting Pulse Cycles' offer. Increase of $ 5,775 b. Assume Razor is operating at capacity and could sell the 750 scooters at its regular markup. 1. Determine the opportunity cost of accepting Pulse Cycles' offer. $ 25,035 2. Determine the effect on profits of accepting Pulse Cycles' offer. Decrease of $ (19,260) x x

Answer rating: 100% (QA)

a To determine the effect on profits of accepting Pulse Cycles offer we need to calculate the profit ... View the full answer