Current Designs faces a number of important decisions that require incremental analysis. Recently, James Smith, owner and CEO of Current Designs, received a phone call from the president of a brewing company. He was calling to inquire about the possibility of Current Designs producing "floating coolers" for a promotion his company was planning. These coolers resemble a kayak but are about one-third the size. They are used to float food and beverages while paddling down the river on a weekend leisure trip. The company would be interested in purchasing 70 coolers for the upcoming summer. It is willing to pay $245 per cooler. The brewing company would pick up the coolers upon completion of the order. James met with Mary Johnson, controller, to identify how much it would cost Current Designs to produce the coolers. After careful analysis, the following costs were identified.
Current Designs faces a number of important decisions that require incremental analysis. Recently, James Smith, owner and CEO of Current Designs, received a phone call from the president of a brewing company. He was calling to inquire about the possibility of Current Designs producing "floating coolers" for a promotion his company was planning. These coolers resemble a kayak but are about one-third the size. They are used to float food and beverages while paddling down the river on a weekend leisure trip. The company would be interested in purchasing 70 coolers for the upcoming summer. It is willing to pay $245 per cooler. The brewing company would pick up the coolers upon completion of the order. James met with Mary Johnson, controller, to identify how much it would cost Current Designs to produce the coolers. After careful analysis, the following costs were identified.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Current Designs faces a number of important decisions that require incremental analysis.
Recently, James Smith, owner and CEO of Current Designs, received a phone call from the president of a brewing company. He was
calling to inquire about the possibility of Current Designs producing "floating coolers" for a promotion his company was planning.
These coolers resemble a kayak but are about one-third the size. They are used to float food and beverages while paddling down the
river on a weekend leisure trip. The company would be interested in purchasing 70 coolers for the upcoming summer. It is willing to
pay $245 per cooler. The brewing company would pick up the coolers upon completion of the order.
James met with Mary Johnson, controller, to identify how much it would cost Current Designs to produce the coolers. After careful
analysis, the following costs were identified.
Direct materials $75 /unit
Variable overhead $15 /unit
Direct labour
55 /unit
Current Designs would be able to modify an existing mould to produce the coolers. The cost of these modifications would be
approximately $2,200.
(a)
Prepare an incremental analysis to determine whether Current Designs should accept this special order to produce the coolers. (Enter
loss with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).)
Incremental Analysis
$
$
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