Question

I just need help on the last part...

Andreasen Coporation manufactures thenmostats for office buildings. The followwing is the cost of cach unit Material Lsbor Variable overhead Flxed overhead (51,207,500 per year 115,000 unts per year) 310.50 8.50 3.50 10.50 Total 342.00 Simpson Company has approached Andreasen with an offer to buy 6,000 thermostats at a price of S45 cach. The regular price is S65. Andreasen has the capacity to produce the 6,000 additional units without affecting its current production of 115,000 units. Simpson requires that each unit use its branding, which requires a more expensive label, resulting in an additional $2 50 per unit material cost. The labor cost of affoing the label will be the same as for the current models. The Simpson order will also require a one-time rental of packaging equipment for $85.800. Required: a. Prepare a schedulc to show the impact of filing the Simpson order on Andreasen's profits for the year. (Enter your answers in thousands rounded to 1 decimal place, (i.e, 5,400,400 should be entered as 5,400.4). Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Answer is complete and correct. All Costs in Thousands of Status Quo 15,000 Units 121,000 Units Difference Salas ravenue 7,475.0 2 7,745.0 )S 270.0 > |higher costs Materials 2.242.5 977.5の 402.5 3,822.6 852.5 1.207.5 2.045.0 1,028.5 423.5 3,828.6 ,018.5 1283.3 28252 51.0 highe 21.00|higher 204.0 e higher 68.0 highe 85.8 highe 8Lower Labor Total variable Contribution maran Less: Foxed costs Operating b. Do you agree with the decision to accept the special order? OYes c. Considering only profit, determine the minimum quantity of thermostats in the special order that would make it profitable, assuming capacity is available. units

Answer 1

Requirement C :
This question can be answered using the break-even analysis
. The incremental fixed cost is $85,800 (the one-time rental).
The contribution margin for the additional units is $11 (= $45-19.50-8.50-3.50-2.50) where the $2.50 is for the additional material. Therefore the break-even point on the incremental units is
85800/11
7800	Units