Morrison Company has a request for a special order of Christmas Wreaths from a local vendor.
The normal selling price is $ and its unit product cost is $ as show below:
Direct Materials $
Direct Labor $
Manufacturing Overhead $
Total Unit Product Cost $
Most of the manufacturing overhead is fixed and unaffected by variations in how many Christmas
Wreaths are produced in a given period. However, $ of the overhead is variable, depending on the
number of wreaths made. The customer would like a special bow tied to the wreath requiring additional
materials costing $ per wreath and would also require a special tool costing $ that would have no
other use once the special order was completed. This order would have no effect on the companys
regular sales, and the order could be filled using the companys existing capacity without affecting any
other order.
Required:
What effect would accepting this order have on the companys operating income if a special price of
$ is offered per wreath for this order? Should the special order be accepted at this price? in excel spreadsheet
