Special-Order Decision, Abematives. Relevant Costs Redood Eegance Company, manufatures wooden coffee tables for saie to specialty fumiture stores. Cumentiy. the company is operating at s0 percent of capacity. A chain of fumiture outiet stores has offered to bay 33.000 unts of Redood's omate nutic tables as long as the table can be cutomiced with the outiet seling price is s6.60 per table. the chain has offered jun $2.40 per table. Redwood can accommodane the special order without affecting cument saies. Unit cost infomation is as follows: Direct materials Direct labor varable overhead Foed overhead 2.00 Total cot per cabie $4.26 Foed overhead is s430.000 per year and will net be affected by the special order. Normally, there is a commiasion of 10 percene of price: this will not be paid on the special order since the outie chain is dealing directly with the company. The special order wil rquire additional fed coats of s15.300 for the design and engrave the outie chain's logo on each table. Required: 1. which albemative is more cot efective and by how much? Acceet the seecial erder The operating income would increase by 2. what if Redwood Elegance Company was operating at capacity and accepting the special order would require reecting an equivalent number of tables sold no eisting cumomens? which abemative would be bemer?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Transcribed Image Text:CengageNOWv2| Online teachin × A v2.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inprogress=false Week 6 Homework eBook E Print Item 1. BEX.17.01 Special-Order Decision, Alternatives, Relevant Costs Redwood Elegance Company, manufactures wooden coffee tables for sale to specialty furniture stores. Currently, the company is operating at 90 percent of capacity. A chain of furniture outlet stores has offered to buy 33,000 units of Redwood's omate rustic tables as long as the table can be customized with the outlet chain's logo. While the normal 2. BEX.17.01.ALGO selling price is $6.60 per table, the chain has offered just $3.40 per table. Redwood can accommodate the special order without affecting current sales. Unit cost information is as follows: 3. BEX. 17.03 Direct materials $1.85 Direct labor 0.32 4. BEX.17.03.ALGO Variable overhead 0.09 5. EX.17.13 Fixed overhead 2.00 Total cost per table $4.26 6. EX.17.13.ALGO Fixed overhead is $430,000 per year and will not be affected by the special order. Normally, there is a commission of 10 percent of price; this will not be paid on the special order since the outlet chain is dealing directly with the company. The special order will require additional fixed costs of $15,300 for the design and setup of the machinery to 7. EX.17.15 engrave the outlet chain's logo on each table. Required: 8. EX.17.15.ALGO 1. Which alternative is more cost effective and by how much? Accept the special order The operating income would increase by $ 2. What if Redwood Elegance Company was operating at capacity and accepting the special order would require rejecting an equivalent number of tables sold to existing customers? Which alternative would be better? Feedback Check My Wark 1. Set up the analysis with the relevant costs and revenues organized under a column heading for each altenative. What is the difference between the two alternatives? 2. Prepare an analysis similar to that in Requirement 2 using the regular price and compare the results to those obtained in Requirement 2. See Example 17.3. Check My Work Next Previous Progress: 4/8 items Assignment Score: 26.19% All work saved. Save and Exit Submit Assignment for Grading 9:52 PM e Type here to search DELL 35°F 12/4/2021 ...

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