Liam's Lamps manufactures designer lamps sold to furniture stores for $75 each. The plant capacity is...
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Accounting
Liam's Lamps manufactures designer lamps sold to furniture stores for $75 each. The plant capacity is 150,000 units annually, but normal volume is 100,000 units. Unit and total costs at normal volume are:
Type of Cost | Unit Costs | Total Costs |
Direct materials | $20.00 | $2,000,000 |
Direct labor | $15.00 | $1,500,000 |
Manufacturing support | $20.00 | $2,000,000 |
Selling and administrative | $10.00 | $1,000,000 |
Total costs | $65.00 | $6,500,000 |
Fixed manufacturing support costs are $1,500,000, and fixed selling and administrative costs are $700,000.
A customer offers to buy 30,000 units at $55 each, with reduced packaging lowering variable selling and administrative costs by 50%.
Required: Evaluate if Liam's Lamps should accept the special order. Prepare a financial impact analysis to support your decision.
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