David would like to order special holiday ornaments for his staff of 720 employees. He just found the perfect item clear glass globes with a unique design and material inside. The only issue is that the globes come from a small manufacturer with limited capacity. The manufacturer told David that it could only produce 360 of these ornaments for him without affecting its regular sales. Normally, these ornaments sell for $25.00 each and cost the company $20.00 to make (David does not know the company's cost structure). Included in the $20.00 cost per unit is $2.55 of fixed-MOH and $1.50 of variable-MOH. (a) Your Answer Correct Answer Your answer is correct. How much will operating income change for the small manufacturer if it produces 360 omaments for David and sells them at a special price of $20.00 per unit? (Round per unit calculations to 2 decimal places, eg 15.25 and final answer to 0 decimal places, e.g. 5,125.) Operating income increases (b) eTextbook and Media Solution by $ Your answer is partially correct. Operating income 918 How much will operating income change for the small manufacturer if it meets David's 720-ornament special order, at a selling price of $20.00 per unit, while reducing its regular sales by 360 units? (Round per unit calculations to 2 decimal places, eg 15.25 and final answer to 0 decimal places, e.g. 5,125.) decreases ✓by $ Attempts: 5 of 5 used 1800

Grant Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 25,000 units of one of its most popular products. Grant currently manufactures 50,000 units of this product in its Loveland, Ohio, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager of Grant wants to set the bid at $14 because she is sure that Grant will get the business at that price. Others on the executive committee of the firm object, saying that Grant would lose money on the special order at that price. Units Manufacturing costs: Direct materials Direct labor Factory overhead Total manufacturing costs Unit cost 50,000 Required 2 Required 4 75,000 $ 200,000 250,000 350,000 $ 800,000 $ 1,125,000 $ 16 $15 Required: 2. What is the relevant cost per unit? What do ou think the minimum short-term bid price per unit should be? What would be the impact on short-term operating income if the order is…

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Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,000 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the order's offering price of $12.70 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting the order even though a loss would be incurred; it would avoid the problem of layoffs and would help maintain the community image of the company. The full cost to produce a pair of weight-lifting gloves is presented below. Direct materials $ 7.40 Direct labor 3.80 Variable overhead 1.60 Fixed overhead 3.10 $15.90 Total No variable selling or administrative expenses would be associated with the order. Non-unit- level activity costs are a small percentage of total costs and are therefore not considered.…

Safe Travel produces car seats for children from newborn to 2 years old. The company is worried because one of its competitors has recently come under public scrutiny because of product failure. Historically, Safe Travel's only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired during an internal inspection. The cost of the inspection is $5.00 per car seat, and the repair cost is $1.00 per car seat. All 200,000 car seats were inspected last year, and 5% were found to have problems with the stitching in the straps during the internal inspection. Another 1% of the 200,000 car seats had problems with the stitching, but the internal inspection did not discover them. Defective units that were sold and shipped to customers needed to be shipped back to Safe Travel and repaired. Shipping costs are $8.00 per car seat, and repair costs are $1.00 per car seat. However, the out-of-pocket costs (shipping and repair) are not the only costs of…

Ellie now had two offers to think about. Her initial reaction was to turn down the special request for 25,000 brochures at $10 per 100. Especially as she did not believe Tyco would realize any repeat or future business from the customer. She also needed to understand her costs versus the cost offered by the small shop to increase Tyco's printing capacity by outsourcing. Should she tell the small shop about the special order request and let them work it out themselves? They might both get what they needed.

Flower Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 17,500 units of one of its most popular products. Flower currently manufactures 35,000 units of this product in its Loveland, Ohio, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager wants to set the bid at $13 because she is sure that Flower will get the business at that price. Others on the executive committee of the firm object, saying that Flower would lose money on the special order at that price.   Units 35,000 52,500 Manufacturing costs:     Direct materials $ 175,000 $ 262,500 Direct labor 210,000 315,000 Factory overhead 140,000 157,500 Total manufacturing costs $ 525,000 $ 735,000 Unit cost $ 15 $ 14   2. What is the relevant cost per unit? What do you think the minimum short-term bid price per unit should be? What would be the impact on short-term operating income if the…

Mallory’s Video Supply has changed its focus tremendously and as a result has dropped the selling price of DVD players from $45 to $38. Some units in the work-in-process inventory have costs of $30 per unit associated with them, but Mallory can only sell these units in their current state for $22 each. Otherwise, it will cost Mallory $11 per unit to rework these units so that they can be sold for $38 each. How much is the financial impact if the units are processed further?   a.   $5 per unit profit   b.   $3 per unit loss   c.   $16 per unit profit   d.   $12 per unit loss