Speedy Sophia makes baseballs that sell for $12.50 each. The company's current annual production and sales are 240,000 baseballs.
Annual fixed costs are $589,550. Variable costs for each baseball are as follows:
Direct material $3.00
Direct labour 1.50
Variable overhead 0.40
Variable selling expenses 1.10
Total variable cost $6.00
Speedy Sophia has received an offer to provide a one-time sale of 8,000 baseballs at $10 each to a network of sports superstores. This sale would not affect other sales, nor would the cost of those sales change. However, the variable costs of the 8,000 baseballs would increase by $0.30 per ball for shipping, and fixed costs would increase by $18,000.
Question: Based solely on financial information, should the company accept this offer and what other factors might the company wish to consider in accepting or rejecting this offer? Show your calculations and explain.
The company should accept offer because there is additional profit of $11,600 from the order.... View the full answer
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Additonal revenue generated : 80,000 Costs to be incurred : Vrriable cost to be incurred : 8000* 6.30 = 50,400 Additonal... View the full answer
CVP It stands for Cost Volume Profit. It shows that if the cost and the volume... View the full answer