Crandle Manufacturers Inc is approached by a potential customer to fulfill a

# Crandle manufacturers inc is approached by a

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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: 3 Objective: 2 AACSB: 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: 3 Objective: 2 AACSB: 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 Quo With Special Order Sales \$128,000 \$133,000 variable costs: Manufacturin g 51,200 54,400 Selling and administrativ e 25,600 26,600 Contribution margin \$51,200 \$52,000 Fixed cost 19,200 19,200 Operating profit \$32,000 \$32,800 Diff: 3 Objective: 2 AACSB: Application of knowledge