Piper Rose Boutique has been approached by the community college to make special
ID: 2470663 • Letter: P
Question
Piper Rose Boutique has been approached by the community college to make special polo shirts for the faculty and staff. The college is willing to buy 4,000 polos with its own design for $6.00 each. The company normally sells its shirts for $12.00 each. The company has enough excess capacity to make this order. A breakdown of their costs is as follows: Direct materials $2.00 Direct labor 0.50 Variable costs 1.50 Fixed costs _2.50 Total cost per unit $6.50 Should Piper Rose Boutique accept the special order made by the college? (Back up your answer with numerical analysis.)
Explanation / Answer
Statement showing computations Particulars Amount Sales revenue from Special order = 4,000*6 24,000.00 Costs: Direct Materials = 4000 * 2 8,000.00 Direct Labour= 4,000*.50 2,000.00 Variable costs = 4,000*1.5 6,000.00 Total costs associated with special order 16,000.00 Income from special order = 24,000 -16,000 8,000.00 Accept the order