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CVP Analysis: Speedy Sophia makes baseballs that sell for $12.50 each. The company's current annual production and sales are 240,000 baseballs....

CVP Analysis:

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.

Top Answer

The company should accept offer because there is additional profit of $11,600 from the order.... View the full answer

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Other Answers

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 analysis: The Cost Volume Profit analysis is the technique of decision making, in which it... View the full answer

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1 comment
  • i apologise for the answer there is typo error in the calculating the variable cost in 248,000 activity level.
    • anchalahuja
    • May 09, 2018 at 6:10am

CVP It stands for Cost Volume Profit. It shows that if the cost and the volume... View the full answer

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