The Special Order:

The company received a special order from a foreign customer for the next month. The job require 5,000 brochures, but the foreign customer is willing to pay only 10 JD per 100 brochures as he can' ford the regular price (17 JD per 100 brochures). If MadabaPrint accepts the job, it will not pay the sale ommission for this job. 

Required:

1) Case one: Assume that Madaba Print has idle capacity for the next month and can accommoda the job without disturbing the other normal orders. Would you advise the company to accept the special order? 

2) Case two: Assume that MadabaPrint doesn't have the capacity to handle the special order without losing part of the normal orders. Would you advise the company to accept the special order (25,000 brochures) and to produce 125,000 brochures for normal orders?

Transcribed Image Text:

MadabaPrint company prints high-quality color brochures in its facility. Production was running at around full capacity: 150,000 brochures a month. Many of the company costs are fixed, but some vary with the number of brochures printed. The information related to monthly operating costs for the company's current activity level of 150,000 brochures a month is as follows: Monthly cost at 150,000 volume Manufacturing costs: Fixed Variable Nonmanufacturing costs: Fixed Variable (sales commission) 6,375 9,000 5,625 1,500 Total Cost 22,500 lama to veten The company typically priced its printing services at an average of 17 JD per 100 brochures MadabaPrint company prints high-quality color brochures in its facility. Production was running at around full capacity: 150,000 brochures a month. Many of the company costs are fixed, but some vary with the number of brochures printed. The information related to monthly operating costs for the company's current activity level of 150,000 brochures a month is as follows: Monthly cost at 150,000 volume Manufacturing costs: Fixed Variable Nonmanufacturing costs: Fixed Variable (sales commission) 6,375 9,000 5,625 1,500 Total Cost 22,500 lama to veten The company typically priced its printing services at an average of 17 JD per 100 brochures MadabaPrint company prints high-quality color brochures in its facility. Production was running at around full capacity: 150,000 brochures a month. Many of the company costs are fixed, but some vary with the number of brochures printed. The information related to monthly operating costs for the company's current activity level of 150,000 brochures a month is as follows: Monthly cost at 150,000 volume Manufacturing costs: Fixed Variable Nonmanufacturing costs: Fixed Variable (sales commission) 6,375 9,000 5,625 1,500 Total Cost 22,500 lama to veten The company typically priced its printing services at an average of 17 JD per 100 brochures MadabaPrint company prints high-quality color brochures in its facility. Production was running at around full capacity: 150,000 brochures a month. Many of the company costs are fixed, but some vary with the number of brochures printed. The information related to monthly operating costs for the company's current activity level of 150,000 brochures a month is as follows: Monthly cost at 150,000 volume Manufacturing costs: Fixed Variable Nonmanufacturing costs: Fixed Variable (sales commission) 6,375 9,000 5,625 1,500 Total Cost 22,500 lama to veten The company typically priced its printing services at an average of 17 JD per 100 brochures MadabaPrint company prints high-quality color brochures in its facility. Production was running at around full capacity: 150,000 brochures a month. Many of the company costs are fixed, but some vary with the number of brochures printed. The information related to monthly operating costs for the company's current activity level of 150,000 brochures a month is as follows: Monthly cost at 150,000 volume Manufacturing costs: Fixed Variable Nonmanufacturing costs: Fixed Variable (sales commission) 6,375 9,000 5,625 1,500 Total Cost 22,500 lama to veten The company typically priced its printing services at an average of 17 JD per 100 brochures MadabaPrint company prints high-quality color brochures in its facility. Production was running at around full capacity: 150,000 brochures a month. Many of the company costs are fixed, but some vary with the number of brochures printed. The information related to monthly operating costs for the company's current activity level of 150,000 brochures a month is as follows: Monthly cost at 150,000 volume Manufacturing costs: Fixed Variable Nonmanufacturing costs: Fixed Variable (sales commission) 6,375 9,000 5,625 1,500 Total Cost 22,500 lama to veten The company typically priced its printing services at an average of 17 JD per 100 brochures

Answer rating: 100% (QA)

To determine whether MadabaPrint should accept the special order in both cases we need to perform a relevant cost analysis Relevant costs are the cost... View the full answer