Rippey Corporation manufactures a single product with the following unit costs for 5,000 units: Direct materials $
Question:
Rippey Corporation manufactures a single product with the following unit costs for 5,000 units:
Direct materials | $ 60 |
Direct labor | 30 |
Factory overhead (40% variable) | 90 |
Selling expenses (60% variable) | 30 |
Administrative expenses (20% variable) | 15 |
Total per unit | $225 |
Recently, a company approached Rippey Corporation about buying 1,000 units for $225. Currently, the models are sold to dealers for $412.50. Rippey's capacity is sufficient to produce the extra 1,000 units. No additional selling expenses would be incurred on the special order.
Required:
A. | What is the profit earned by Rippey Corporation on the original 5,000 units? |
B. | Should Rippey accept the special order if its goal is to maximize short-run profits? How much will income be affected? |
C. | Determine the minimum price Rippey would want to receive in order to increase profits by $7,500 on the special order. |
D. | When making a special-order decision, what qualitative aspects of the decision should Rippey Corporation consider? |
Expert Answer:
A To calculate the profit earned by Rippey Corporation on the original 5000 units we need to subtract the total unit cost from the selling price per u... View the full answer
