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27) Crandle Manufacturers Inc. is approached by a potential customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The company has excess capacity. The following per unit data apply for sales to regular customers:Variable costs:Direct materials$130Direct labor60Manufacturing support105Marketing costs95Fixed costs:Manufacturing support175Marketing costs65Total costs630Markup (50%)315Targeted selling price$945What is the change in operating profits if the one-time-only special order for 1,030 units is accepted for $550 a unit by Crandle? A) $164,800 increase in operating profits B) $164,170 increase in operating profits C) $164,170 decrease in operating profits D) $164,800 decrease in operating profits Answer: AExplanation: Contribution margin per unit = $550 - ($130 + $60 + $105 + $95) = $160Change in operating profit = 1,030 × $160 = $164,800 increase Diff: 3Objective: 2AACSB: Analytical thinking
28) Excellent Manufacturers Inc. has a current production level of 20,000 units per month.Unit costs at this level are: Direct materials$0.26Direct labor0.40Variable overhead0.16Fixed overhead0.21Marketing - fixed0.25Marketing/distribution - variable0.42Current monthly sales are 18,000 units. Jax Company has contacted Excellent about purchasing 1,550 units at $2.00 each. Current sales would NOT be affected by the one-time-only special order, and variable marketing/distribution costs would NOT be incurred on the special order. What is Ratzlaff Company's change in operating profits if the special order is accepted? Diff: 3Objective: 2AACSB: Application of knowledge
29) Snapper Tool Company has plenty of excess capacity to accept a special order. Shown below is an "what-if" analysis of the special order. Which of the following is the correct decision and reason?Status QuoWith SpecialOrderSales$128,000$133,000variablecosts:Manufacturing51,20054,400Selling andadministrative25,60026,600Contributionmargin$51,200$52,000Fixed cost19,20019,200Operatingprofit$32,000$32,800Diff: 3Objective: 2AACSB: Application of knowledge