12 Jul WHAT WOULD HAVE BEEN THE EFFECT ON MONTHLY OPERATING INCOME OF ACCEPTING THE SPECIAL ORDER?
The following financial data apply to the DVD production plant of the Randall Company for March 2011:Budgeted Manufacturing Cost per DVD PackDirect Materials$1.60Direct Manufacturing Labor 0.90Variable Manufacturing Overhead 0.70Fixed Manufacturing Overhead 1.00 4.20Variable manufacturing overhead varies with the number of DVD packs produced. Fixed manufacturing overhead of $ 1 per pack is based on budgeted fixed manufacturing overhead of $ 150,000 per month and budgeted production of $ 150,000 packs per month. The Randall Company sells each pack for $ 5. Document Preview: The following financial data apply to the DVD production plant of the Randall Company for March 2011:Budgeted Manufacturing Cost per DVD PackDirect Materials$1.60Direct Manufacturing Labor 0.90Variable Manufacturing Overhead 0.70Fixed Manufacturing Overhead 1.00 4.20Variable manufacturing overhead varies with the number of DVD packs produced. Fixed manufacturing overhead of $ 1 per pack is based on budgeted fixed manufacturing overhead of $ 150,000 per month and budgeted production of $ 150,000 packs per month. The Randall Company sells each pack for $ 5.Marketing Costs have two components:Variable marketing costs (sales commissions) of 5% of revenuesFixed monthly costs of $ 65,000During March 2011, Mark Eberson, a Randall Company salesperson, asked the president for permission to sell 1,000 packs at $ 4.00 per pack to a customer not in Randalls normal marketing channels. The president refused this special order because the selling price was below the total budgeted manufacturing costs.1) What would have been the effect on monthly operating income of accepting the special order?2) Comment on the presidents below manufacturing costs reasoning for rejecting the special order.3) What other factors should the president consider before accepting or rejecting the special order? Attachments: Relevants-Cos….docx
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