Emily's Electronics produces wireless speakers sold to distributors for $50 each. The plant capacity is 500,000...
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Emily's Electronics produces wireless speakers sold to distributors for $50 each. The plant capacity is 500,000 units annually, but normal volume is 400,000 units. The unit and total costs at normal volume are as follows:
Type of Cost | Unit Costs | Total Costs |
Direct materials | $15.00 | $6,000,000 |
Direct labor | $10.00 | $4,000,000 |
Manufacturing support | $12.00 | $4,800,000 |
Selling and administrative | $8.00 | $3,200,000 |
Total costs | $45.00 | $18,000,000 |
Fixed manufacturing support costs are $3,500,000, and fixed selling and administrative costs are $1,800,000.
A prospective customer offers to purchase 75,000 units at $35 each, with simplified packaging reducing variable selling and administrative costs by 40%.
Required: Evaluate if Emily's Electronics should accept this special order. Prepare a break-even analysis to determine the minimum order size that would be acceptable.
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