
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Refer to the information for Smooth Move Company on the previous page. If Smooth
Move accepts the order, no fixed manufacturing activities will be affected because there is
sufficient excess capacity.
Required:
1. What are the alternatives for Smooth Move?
2. CONCEPTUAL CONNECTION Should Smooth Move accept the special order? By how
much will profit increase or decrease if the order is accepted?
3. CONCEPTUAL CONNECTION Briefly explain the significance of the statement in the
exercise that “existing sales will not be affected” (by the special sale).

Transcribed Image Text:Smooth Move Company manufactures professional paperweights and has been ap-
proached by a new customer with an offer to purchase 15,000 units at a per-unit price of
$7.00. The new customer is geographically separated from Smooth Move's other custom-
ers, and existing sales will not be affected. Smooth Move normally produces 82,000 units
but plans to produce and sell only 65,000 in the coming year. The normal sales price is $12
per unit. Unit cost information is as follows:
Direct materials
$3.10
Direct labor
2.25
Variable overhead
1.15
Fixed overhead
1.80
Total
$8.30
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