Question

Camino Company manufactures designer to-go coffee cups. Each line of coffee cups is endorsed by a high- profile celebrity and designed with special elements selected by the celebrity. During the most recent year, Camino Company had the following operating results while operating at 75 percent (67,500 units) of its capacity: $ 945,000 371,250 Sales revenue Cost of goods sold Gross profit Operating expenses $ 573,750 33,750 $ 540,000 Net operating income Camino's cost of goods sold and operating expenses are 80 percent variable and 20 percent fixed. Camino has received an offer from a professional wrestling association to design a coffee cup endorsed by its biggest star and produce 18,000 cups for $10 each (total $180,000). These cups would be sold at wrestling matches throughout the United States. Acceptance of the order would require a $72,000 endorsement fee to the wrestling star, but no other increases in fixed operating expenses. Required: 1. Complete the incremental analysis of the special order in the table provided below. Total Per cup Incremental Revenue Less: Incremental Costs Variable COGS Variable Operating Expenses Endorsement Fee Incremental Profit 2. Should Camino accept this special order? No Yes 3. If Camino were operating at full capacity, what price would Camino require for the special order? Price per Cup

Answer 1

Total (iso cups) Per c 6000 10 9 200 variable cogs (271250 x80%) 6a5oo 才200 0- 3375吙80e- Endzement 162500 dee々(7a000/16000) コ2000 4 158 400 Total Cosh 8.8 21 boo Nole Flxed Coss ase evnt hue as are no ordor 1600 . enoraltn g evenue 3) The Mint rn um py/ ce put unt= vanable cost々ナ1entbuHon Ma9tgin lost 18

calcula tiom o CM 4u5 000 Vaslabe coqs(391250$80%) 204 000 RHooo G1 O O o 4,2