Question

Chapter 7 Assignment i Saved Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine. 10 points Lost Mine has offered to buy 3,200 of the US umbrellas at a price of $33 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella: eBook Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost Regular sales price $ 13.00 7.00 9.50 2.50 $32.00 $41.00 Print References Required: 1. Compute the incremental profit (or loss) from accepting the special order. 2. Should Mohave accept the special order? 3. Suppose that the special order had been to purchase 3,700 umbrellas for $29.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario. 4. Assume that Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute the incremental profit (or loss) from accepting the special order. Profit (or Loss) by Required 1 Required 2 >

Answer 1

1
	Per unit	Total 3200 units
Incremental revenue	33.00	105600
Incremental costs:
Direct materials	13.00	41600
Direct labor	7.00	22400
Variable manufacturing overhead	9.50	30400
Total Incremental costs		94400
Incremental net operating income(loss)		11200
Profit(or loss) increases by 11200
2
Yes, accept the special order
3
	Per unit	Total 3700 units
Incremental revenue	29.00	107300
Incremental costs:
Direct materials	13.00	48100
Direct labor	7.00	25900
Variable manufacturing overhead	9.50	35150
Total Incremental costs		109150
Incremental net operating income(loss)		(1850)
Profit (or loss) decreases by 1850
4
Special order price	41.00	per unit