Acceptance of a special order

Subject:AccountingPrice:2.87 Bought7

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Acceptance of a special order. Although the Missouri Company has the capacity to produce 6,000 units per month, current plans call for monthly production and sales of only 10,000 units at $15 each. Costs per unit are as follows: .

Direct Materials..... 5.00

Direct Labor..... 3.00

Variable Factory Overhead.. 0.75

Fixed Factory Overhead........... 1.50

Variable Marketing Expense..... 0.25

Fixed Marketing Expense..... 1.00

                                         $11.50

Required:

1) Recommendation as to whether the company should accept a special order for 4,

(2) The maximum price the Missouri Company should be willing to pay an outside supplier

(3) The unit cost figure the company would use in costing inventory, using direct costing. @$10 who is interested in manufacturing this product. resulting in a 10% increase in sales volume.

(4) The effect on the monthly contribution margin if the sales price were reduced to $14,

(CGAA adapted)