Rowe Tool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the forecasted income statement for the next quarter, which is the typical planning horizon used at RTD. RTD expects to sell 48,000 units during the quarter. RTD carries no inventories.
Rowe Tool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the forecasted income statement for the next quarter, which is the typical planning horizon used at RTD. RTD expects to sell 48,000 units during the quarter. RTD carries no inventories.
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
Section: Chapter Questions
Problem 16E
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![Exercise 4-26 (Algo) Special Orders (LO 4-1, 2)
Rowe Tool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the
forecasted income statement for the next quarter, which is the typical planning horizon used at RTD. RTD expects to sell 48,000 units
during the quarter. RTD carries no inventories.
Sales revenue
Costs of fitting produced
Gross profit
Administrative costs.
Operating profit
Amount
$ 1,291,200
988,800
$302,400
228,000
$ 74,400
Required A
Per Unit
Fixed costs included in this income statement are $312,000 for depreciation of plant and machinery and miscellaneous factory
operations and $96,000 for administrative costs. RTD has received a request for 10,000 fittings to be produced in the next quarter
from Endicott Manufacturing. Endicott has never purchased from RTD, although they have been a local company for many years.
Endicott has offered to pay $20.30 per unit. RTD can easily produce the 10,000 units with its existing capacity. Production of the
10,000 units will incur all variable manufacturing costs but no fixed manufacturing costs. No administrative costs will be incurred
because of the order.
Required B
$ 26.90
20.60
$6.30
4.75
$ 1.55
Required:
a. What impact would accepting this special order have on operating profit?
b. Should RTD accept the order?
Complete this question by entering your answers in the tabs below.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff9a004f5-7b00-4901-a9f0-6f4187e069d6%2Fc780755e-d94c-4d84-83af-dbbbd0c1f902%2Fcazsw4r_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 4-26 (Algo) Special Orders (LO 4-1, 2)
Rowe Tool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the
forecasted income statement for the next quarter, which is the typical planning horizon used at RTD. RTD expects to sell 48,000 units
during the quarter. RTD carries no inventories.
Sales revenue
Costs of fitting produced
Gross profit
Administrative costs.
Operating profit
Amount
$ 1,291,200
988,800
$302,400
228,000
$ 74,400
Required A
Per Unit
Fixed costs included in this income statement are $312,000 for depreciation of plant and machinery and miscellaneous factory
operations and $96,000 for administrative costs. RTD has received a request for 10,000 fittings to be produced in the next quarter
from Endicott Manufacturing. Endicott has never purchased from RTD, although they have been a local company for many years.
Endicott has offered to pay $20.30 per unit. RTD can easily produce the 10,000 units with its existing capacity. Production of the
10,000 units will incur all variable manufacturing costs but no fixed manufacturing costs. No administrative costs will be incurred
because of the order.
Required B
$ 26.90
20.60
$6.30
4.75
$ 1.55
Required:
a. What impact would accepting this special order have on operating profit?
b. Should RTD accept the order?
Complete this question by entering your answers in the tabs below.
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