Rutkey Collectibles is a small toy company that manufactures and sells metal rep
ID: 2341616 • Letter: R
Question
Rutkey Collectibles is a small toy company that manufactures and sells metal replicas of classic cars. Each car sells for $3.15 The cost of each unit follows:
One of Rutkey's regular customers asked the company to fill a special order of 500 units at a selling price of $2.15 per unit. Rutkey's can fill the order using existing capacity without affecting total fixed costs for the month. However, Rutkey's manager was concerned about selling at a price below the $2.90 cost per unit and has asked for your advice.
Required:
a. Prepare a schedule to show the impact of providing the special order of 500 units on Rutkey's profits in addition to the regular production and sales of 22,300 units per month. (Select option "higher" or "lower", keeping Status Quo as the base. Select "None" if there is no effect.)
Materials $ 1.00 Labor 0.60 Variable overhead 0.30 Fixed overhead ($22,300 per month, 22,300 units per month) 1.00 Total costs per unit $ 2.90 Required a. Prepare a schedule to show the impact of providing the special order of 500 units on Rutkey's profits in addition to the regular production and sales of 22,300 units per month. (Select option "higher" or "lower", keeping Status Quo as the base. Select "None" if there is no effect.) Status Quo 22,300 Cars Alternative 22,800 Cars Difference Sales revenue Less variable costs: Materials Labor Variable overhead Total variable cost Contribution margin Less: Fixed costs Operating profit b. Based solely on the data given, what is the lowest price per unit at which the model cars could be sold for the special order without reducing Rutkey's profits? (Round your answer to 2 decimal places.) Lowest price per car c. If Rutkey Collectibles company was operating at capacity, what would happen to operating profit if the special order was accepted? Increase Decrease No changeExplanation / Answer
a Status Quo 22300 cars Alternative 22800 cars Difference Sales revenue 70245 71320 1075 Higher Less Variable costs: Materials 22300 22800 500 Higher Labor 13380 13680 300 Higher Variable overhead 6690 6840 150 Higher Total variable cost 42370 43320 950 Higher Contribution margin 27875 28000 125 Higher Less: Fixed costs 22300 22300 0 None Operating Profit 5575 5700 125 Higher b Lowest price =Variable costs = 1+0.6+0.3 = $1.90 per car c The opeating profit would decrease