SolarGlo Company manufactures solar powered garden lights and has been approached by a ew customer with...

 

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SolarGlo Company manufactures solar powered garden lights and has been approached by a ew customer with an offer to purchase 20,000 units at a per-unit price of $20. The new customer is geographically separated from SolarGlo's other customers, and existing sales will not be affected. SolarGlo normally produces 165,000 units but plans to produce and sell only 140,000 in the coming year. The normal sales price is $28 per unit. Unit cost information is as follows: Direct materials $12.00 Direct labour 3.75 Variable overhead 3.50 Fixed overhead 2.50 Total $21.75 The customer wants to have its company logo affixed to each solar light using a label. SolarGlo would have to purchase a special logo labeling machine for this order that would cost $22,000. The machine would be able to label all 20,000 units and then it would be scrapped (with no further value), No other fixed overhead activities would be affected. Required: Conceptual Connection: Should SolarGlo accept the special order? No By how much will profit.increase or decrease if the order is accepted? Decrease SolarGlo Company manufactures solar powered garden lights and has been approached by a ew customer with an offer to purchase 20,000 units at a per-unit price of $20. The new customer is geographically separated from SolarGlo's other customers, and existing sales will not be affected. SolarGlo normally produces 165,000 units but plans to produce and sell only 140,000 in the coming year. The normal sales price is $28 per unit. Unit cost information is as follows: Direct materials $12.00 Direct labour 3.75 Variable overhead 3.50 Fixed overhead 2.50 Total $21.75 The customer wants to have its company logo affixed to each solar light using a label. SolarGlo would have to purchase a special logo labeling machine for this order that would cost $22,000. The machine would be able to label all 20,000 units and then it would be scrapped (with no further value), No other fixed overhead activities would be affected. Required: Conceptual Connection: Should SolarGlo accept the special order? No By how much will profit.increase or decrease if the order is accepted? Decrease

Answer rating: 100% (QA)

Solution In this case St may be easier to deal with the total costs Qud revenues ... View the full answer