Question 6Assume Rajan Manufacturing Ltd makes sports vest for local soccer, baseball, basketball, and othersports teams. Rajan, the awner, purchases the vests and prints graphics on the vests for each team.The graphics were designed several years ago, so design costs are no longer incurred. On average,Rajan sells 1,000 vests each month. Typical monthly financial data is shown below:Per UnitTatal Monthly Data at1,000 VestsSales revenue$20$20 000Variable costs:Direct materials$8$8 000Direct labourManufacturing overheadContribution margin22 000133 00013 000$7 000Foxed costs (rent, salaries, etc.)4 000Profit$3.000The monthly information provided relates to the company's routine monthly aperations. Arepresentative of the lacal university recently approached Rajan to ask about a one-time special order.The university will be hosting a state-wide saccer event and is willing to pay Rajan's Manufacturing $17per shirt to make 200 custom vests for the event. Enough idle capacity exists to handle this order;hence, it will not affect other sales.Rajan requires a modification of the design that will allow a $1 reduction indirect material cost. Allather variable casts will be incurred to praduce the special order, and he will pay a firm $600 to designthe graphics that will be printed on the vests.This special arder will have no ather effect on Rajan's monthly fixed casts.Required:a) Explain how differential analysis assist managers in evaluating special order decisions? (Nocalculation required)ANSWER a):Whichthe data above should be ignored in making the special-ordecision? Far whatreason?ANSWER b):c) Should Rajan accept the special order? Shaw calculation.

a) Special order refers to a unique one-time order made by a customer(usually one-time)…

a) Explain how differential analysis assist managers in evaluating special order decisions? (No calkulation required) ANSWER a): b) Which of the data above should be ignored in making the special-order decision? For what reason? ANSWER b): c) Shauld Rajan accept the special order? Shaw calculation.

a) Explain how differential analysis assist managers in evaluating special order decisions? (No calkulation required) ANSWER a): b) Which of the data above should be ignored in making the special-order decision? For what reason? ANSWER b): c) Shauld Rajan accept the special order? Shaw calculation.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter4A: Nopat Breakeven: Revenues Needed To Cover Total Operating Costs

Section: Chapter Questions

Problem 1EP

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Assume RajanManufacturing Ltd makes sports vest for local soccer, baseball, basketball, and other sports teams. Rajan, the owner, purchases the vests and prints graphics on the vests for each team. The graphics were designed several years ago, so design costs are no longer incurred. On average, Rajan sells 1,000 vests each month. Typical monthly financial data is shown below: Per Unit Total Monthly Data at 1,000 Vests Sales revenue $20 $20 000 Variable costs: Direct materials $8 $8 000 Direct labour 2 2 000 Manufacturing overhead 3 13 3 000 13 000 Contribution margin $ 7 $ 7 000 Fixed costs (rent, salaries, etc.) 4 000 Profit $ 3 000 The monthly information provided relates to the company’s routine monthly operations. A representative of the local university recently approached Rajan to ask about a one-time special order.…
Assume Rajan Manufacturing Ltd makes sports vest for local soccer, baseball, basketball, and other sports teams. Rajan, the owner, purchases the vests and prints graphics on the vests for each team. The graphics were designed several years ago, so design costs are no longer incurred. On average, Rajan sells 1,000 vests each month. Typical monthly financial data is shown below: Per Unit Total Monthly Data at 1,000 Vests Sales revenue $20 $20 000 Variable costs: Direct materials $8 $8 000 Direct labour 2 2 000 Manufacturing overhead 3 13 3 000 13 000 Contribution margin $ 7 $ 7 000 Fixed costs (rent, salaries, etc.) 4 000 Profit $ 3 000 The monthly information provided relates to the company’s routine monthly operations. A representative of the local university recently approached Rajan to ask about a one-time special…
Assume Rajan Manufacturing Ltd makes sports vest for local soccer, baseball, basketball, and other sports teams. Rajan, the owner, purchases the vests and prints graphics on the vests for each team. The graphics were designed several years ago, so design costs are no longer incurred. On average, Rajan sells 1,000 vests each month. Typical monthly financial data is shown below: Per Unit Total Monthly Data at 1,000 Vests Sales revenue $20 $20 000 Variable costs: Direct materials $8 $8 000 Direct labour 2 2 000 Manufacturing overhead 3 13 3 000 13 000 Contribution margin $ 7 $ 7 000 Fixed costs (rent, salaries, etc.) 4 000 Profit $ 3 000 The monthly information provided relates to the company’s routine monthly operations. A representative of the local university recently approached Rajan to ask about a one-time special order. The university will be hosting a state-wide soccer event and is willing to pay Rajan’s Manufacturing $17 per shirt to make 200 custom vests for…
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