Use the following information for Exercises 8-40 and 8-41:
Smooth Move Company manufactures professional paperweights and has been approached 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 customers, 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:
8-40 Special-Order Decision
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.
Identify the alternatives available for Company S.
Special-Order Decision:
The main focus of the special-order decision is to decide whether the specially priced order should be rejected or selected. The special orders may help the firms when they are operating with their lower capacity of production...
2.
Describe whether the special order should be selected. Also, calculate the amount of increase or decrease in profit if the special order is selected.
3.
Describe the meaning of the statement “existing sale will not be affected”.
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