Question

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. Lost Mine has offered to buy 2,700 of the US umbrellas at a price of $25 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost Regular sales price $11.00 6.00 7.00 2.50 $26.50 $33.00 Required: 1. Compute the incremental profit (or loss) from accepting the special order. Profit (or Loss) -by 2. Should Mohave accept the special order? O No Yor

Answer 1

Ansue calculation of inerementa proft (on to 25 selling price pen unt Valable osts: pire c matenia labour Direct vantae manyfachening ovenhead C24) Contabution unit per naimber o unik odered TnCrementa profit fom accepfing e Special oder 2700 X

nohave shoud aceept tspecial oder because of mcremental pofit Selling pnce por unit Vanigde cos.- Drire C mateial Drect labbw 24) vantable manyfactrang ovenhead lok por urit Incremental 3200 number ot units ordered . Inoemental lo 4 3200 ) Auming Mohave s openaking at tult capachy fIked manufactonng cost pen unit Totu Vanigble cosh per unit speciay order pen unst = 26.SD per unit