Carlsbad Enterprises has a capacity to produce 360,000 computer cases per year.
ID: 2424164 • Letter: C
Question
Carlsbad Enterprises has a capacity to produce 360,000 computer cases per year. The company is currently producing and selling 280,000 cases per year at a selling price of $396 per case. The cost of producing and selling one case follows:
Variable manufacturing costs $ 159
Fixed manufacturing costs 41
Variable selling and administrative costs 85
Fixed selling and administrative costs 20
Total costs $ 305
The company has received a special order for 40,000 cases at a price of $250 per case. Because it does not have to pay a sales commission on the special order, the variable selling and administrative costs would be only $52 per case. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations:
Selling price per case $ 250
Variable manufacturing costs 159
Fixed manufacturing costs 41
Variable selling and administrative costs 52
Fixed selling and administrative costs 20
Net loss per case $ (22 )
Required:
Find the Status Quo for 280000 units and the alternative for 32000 units
280000 320000 Sales Revenue Variable Cost: Manufacturing Cost Selling and Administrative Cost Contribution Cost Fixed Cost Operating ProfitExplanation / Answer
Since the Incremental benefit is possitive which means by acceprting the order, we can Get additional $15,60,000 of profit.
Particulars No of Units Incremental Per Unit 280000 320000 Sales Revenue 396 11,08,80,000 12,08,80,000 1,00,00,000 Variable Cost: Manufacturing Cost 159 4,45,20,000 5,08,80,000 63,60,000 Selling and Administrative Cost 85 2,38,00,000 2,58,80,000 20,80,000 Contribution Cost 152 4,25,60,000 4,41,20,000 15,60,000 Fixed Cost 61 1,70,80,000 1,70,80,000 - Operating Profit 91 2,54,80,000 2,70,40,000 15,60,000