Analyzing Special-Order Decision
Eclipse Company manufactures a variety of sunglasses. Production information for its most popular line, the Total Eclipse (TE), follows:
Per Unit | |
Sales price | $37.50 |
Direct materials | $ 5.75 |
Direct labor | 2.50 |
Variable manufacturing overhead | 1.75 |
Fixed manufacturing overhead | 4.00 |
Total manufacturing cost | $14.00 |
Suppose that Eclipse has been approached about making a special order for 2,000 units of custom TE sunglasses for a new semiprofessional volleyball league. All units in the special order would be produced in the league’s signature colors with a specially designed logo emblem attached to the side of the glasses. The league has offered to pay $30.00 per unit in the special order. Additional costs for the special order total $1.50 per unit for mixing the special frame color and purchasing the emblem with the league’s logo that will be attached to the glasses.
Required:
1.Assuming Eclipse has the idle capacity necessary to accommodate the special order, should it do so? Determine the impact this would have on Eclipse’s net income.
2.Suppose Eclipse is currently operating its production facility at full capacity and accepting the special order would mean reducing production of its regular TE model. Determine whether Eclipse should accept the special order.
3.Determine the special order price per unit at which Eclipse is indifferent to accepting the special order.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.