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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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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:

Chapter 8, Problem 40E, Use the following information for Exercises 8-40 and 8-41: Smooth Move Company manufactures

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. 1. What are the alternatives for Smooth Move?
  2. 2. CONCEPTUAL CONNECTION Should Smooth Move accept the special order? By how much will profit increase or decrease if the order is accepted?
  3. 3. CONCEPTUAL CONNECTION Briefly explain the significance of the statement in the exercise that “existing sales will not be affected” (by the special sale).

1.

To determine

Identify the alternatives available for Company S.

Explanation

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.

To determine

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.

To determine

Describe the meaning of the statement “existing sale will not be affected”.

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