Since there is excess capacity, no additional fixed costs will be incurred on the order
Relevant cost per unit = 0.14+0.05+0.09
= $0.28
Should not accept
b.Relevant cost = 0.09+0.05+0.09
= $0.24
Yes, should accept
c.Profit = (0.5*110%-0.14-0.04-0.05-0.09)*10,400 – 812
= $1,580
d.Yes
Problem 8-20 Sunland Packaging Company is a leading manufacturer of cardboard boxes and other product packaging...
Ivanhoe Packaging Company is a leading manufacturer of cardboard
boxes and other product packaging solutions. One of the company’s
major product lines is custom-printed cake boxes that are sold to
some of the country’s best known bakeries at a price of $0.50 per
box. To maintain its high-quality image, Ivanhoe uses a thick
premium coated paper for all of its cake boxes. Based on annual
production of 1,000,000 boxes, Ivanhoe’s cost for producing a box
is as follows:
Paper
$0.16...
Guilford Packaging Company is a leading manufacturer of
cardboard boxes and other product packaging solutions. One of the
company’s major product lines is custom-printed cake boxes that are
sold to some of the country’s bestknown bakeries at a price of
$0.50 per box. To maintain its high-quality image, Guilford uses a
thick premium coated paper for all of its cake boxes. Based on
annual production of 1,000,000 boxes, Guilford’s cost for producing
a box is as follows:
Paper
$0.16
Ink...