Question

Green Mower, Inc. The following monthly financial data are for Green Mowers Inc., a maker of electric lawn mowers. On average, Green Mowers makes 5,000 mowers each month. Total Monthly Data Per Unit at 5,000 Mowers Sales revenue $200 $1,000,000 Variable costs 150 750,000 Contribution margin $50 250,000 Fixed costs 160,000 Profit $90,000 Green Mowers received an offer from a one-time customer to purchase 1,000 mowers this coming month for $180 per unit. Green Mowers can produce up to 5,000 units a month, so the special order would reduce regular customer sales. Variable costs per unit will remain at $150. This special order will have no effect on fixed costs. Required a. Using the differential analysis format determine whether Green Mowers would be better off rejecting the special order (Alternative 1) or accepting the special order (Alternative 2). b. Summarize the result of accepting the special order. c. Assume that Green Mowers can increase capacity to accommodate the special order by paying an additional $20 in variable costs per unit (for overtime pay) for the additional 1,000 units. With this increased capacity, the special order would not affect sales to the company's regular customers. Using differential analysis determine whether Green Mowers would be better off rejecting (Alternative 1) or accepting (Alternative 2) the special order.

Please note that there is n specific format to use. Answer the question in whatever format you can, Thanks

Answer 1

Part 1
		Alternate 1	Alternate 2
		Rejecting the order	Accepting the order	Difference
	No. of units sales	5000	5000
	Contribution margin per unit for normal	$50
	Contribution margin per unit for special order		$30
	Total Contribution margin	$2,50,000	$2,30,000	-$20,000
	Since the Contribution margin when order is accepted is less than when rejected hence the order should be rejected
Part 2		Alternate 1	Alternate 2
		Rejecting the order	Accepting the order	Difference
	No. of units sales	5000	6000
	Contribution margin per unit for normal	$50
	Contribution margin per unit for special order($30-$20)		$10
	Contribution margin per unit for special order
	Total Contribution margin	$2,50,000	$2,60,000	$10,000
	Since the Contribution margin when order is accepted is more than when rejected hence the order should be accepted