Should Reward One accept this special order?assume that monthly capacity is 12,000 windows. Reward One is concerned that if it accepts the special order, its existing customers will immediately demand a price discount of $20 in the month in which the special order is being filled. They would argue that Reward One’s capacity costs are now being spread over more units and that existing customers should get the benefit of these lower costs. Should Reward One accept the special order under these conditions? Show your calculations. (CMA, adapted) The Reward One Company manufactureswinaows. Its manufacturing plant has the capacity to produce 12,000 windows each month. Current pro-duction and sales are 10,000 windows per month. The company normally charges $250 per window. Costinformation for the current activity level is as follows:Variable costs that vary with number of units produced$ 60,000Direct materialsDirect manufacturing labor700,000150,000Variable costs (for setups, materials handling, quality control, and so on)that vary with number of batches, 100 batches x $1,500 per batchFixed manufacturing costsFixed marketing costs250,000400,000$2,100,000Total costsReward One has just received a special one-time-only order for 2,000 windows at $225 perwindow. Acceptingthe special orderwould not affectthe company's regularbusiness or its fixed costs. Reward One makeswindowsfor its existing customers in batch sizes of 100 windows (100 batches x 100 windows per batch = 10,000windows). The special order requires Reward One to make the windows in 25 batches of 80 windows.

Special orders are to evaluated based on Relevant costs. Relevant costs are those costs which change…

Answered: (CMA, adapted) The Reward One Company…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 7PB: Remarkable Enterprises requires four units of part A for every unit of Al that it produces....

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Should Reward One accept this special order?assume that monthly capacity is 12,000 windows. Reward One is concerned that if it accepts the special order, its existing customers will immediately demand a price discount of $20 in the month in which the special order is being filled. They would argue that Reward One’s capacity costs are now being spread over more units and that existing customers should get the benefit of these lower costs. Should Reward One accept the special order under these conditions? Show your calculations.

(CMA, adapted) The Reward One Company manufactures
winaows. Its manufacturing plant has the capacity to produce 12,000 windows each month. Current pro-
duction and sales are 10,000 windows per month. The company normally charges $250 per window. Cost
information for the current activity level is as follows:
Variable costs that vary with number of units produced
$ 60,000
Direct materials
Direct manufacturing labor
700,000
150,000
Variable costs (for setups, materials handling, quality control, and so on)
that vary with number of batches, 100 batches x $1,500 per batch
Fixed manufacturing costs
Fixed marketing costs
250,000
400,000
$2,100,000
Total costs
Reward One has just received a special one-time-only order for 2,000 windows at $225 perwindow. Accepting
the special orderwould not affectthe company's regularbusiness or its fixed costs. Reward One makeswindows
for its existing customers in batch sizes of 100 windows (100 batches x 100 windows per batch = 10,000
windows). The special order requires Reward One to make the windows in 25 batches of 80 windows.

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