e Party Connection prepares complete party kits for various types of celebrations. It is currently operating at 80% of its capacity. It costs The Party Connection $20.50 to make a packet that it sells for $25.00. It currently makes and sells 84,000 packets per year. Detailed information attached   The Party Connection has received a special order request for 25,000 packets at a price of $23 per packet to be shipped overseas. Suppose the following information is discovered with further analysis: o       The per unit overhead cost of $0.50 is 50% variable ($0.25) and 50% fixed ($0.25). o       The per unit Selling costs of $1.75 is 26.67% variable ($0.47) and 73.33% fixed ($1.28). o       Administrative expenses would not change.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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the Party Connection prepares complete party kits for various types of celebrations. It is currently operating at 80% of its capacity. It costs The Party Connection $20.50 to make a packet that it sells for $25.00. It currently makes and sells 84,000 packets per year. Detailed information attached
 

The Party Connection has received a special order request for 25,000 packets at a price of $23 per packet to be shipped overseas. Suppose the following information is discovered with further analysis:
o       The per unit overhead cost of $0.50 is 50% variable ($0.25) and 50% fixed ($0.25).
o       The per unit Selling costs of $1.75 is 26.67% variable ($0.47) and 73.33% fixed ($1.28).
o       Administrative expenses would not change.
•       Should the Party Connection accept this special order?

Per Unit Annual Total
$25.00 $2,100,000
Sales
Direct Materials
12.00
1,008,000
Direct Labor
6.00
504,000
Overhead
.50
42,000
Selling Expenses
1.75
147,000
Administrative Expenses
25
21,000
Total Costs and Expenses
20.50
1.722,000
Operating Income
$ 4.50
$378,000
Transcribed Image Text:Per Unit Annual Total $25.00 $2,100,000 Sales Direct Materials 12.00 1,008,000 Direct Labor 6.00 504,000 Overhead .50 42,000 Selling Expenses 1.75 147,000 Administrative Expenses 25 21,000 Total Costs and Expenses 20.50 1.722,000 Operating Income $ 4.50 $378,000
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