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Problem $11-33$ and $11-34($Algo$)$ Special Order; ABC Costing $[$LO $11-2,11-8]$

$[$The following information applies to the questions displayed below.$]$

Green Grow Incorporated $($GGI$)$ manufactures lawn fertilizer. Because of the product's very high quality, GGI often receives

special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the

precise mix of components advertised for that type of fertilizer. GGI's operating capacity is $31,000$ one$-$hundred$-$pound

bags per month, and it currently is selling $29,000$ bags manufactured in $29$ batches of $1,000$ bags each. The firm just

received a request for a special order of $6,800$ one$-$hundred$-$pound bags of fertilizer for $$180,000$ from APAC, a research

organization. The production costs would be the same, but there would be no variable selling costs. Delivery and other

packaging and distribution services would cause a one$-$time $$4,400$ cost for GGI. The special order would be processed in

two batches of $3,400$ bags each. $($No incremental batch$-$level costs are anticipated. Most of the batch$-$level costs in this

case are short$-$term fixed costs, such as salaries and depreciation.$)$ The following information is provided about GGI's

current operations:

No marketing costs would be associated with the special order. Because the order would be used in research and

consistency is critical, APAC requires that GGI fill the entire order of $6,800$ bags.

Assume that the $$17\mathrm{.}00$ fixed manufacturing overhead cost per unit consists of facility$-$level costs $($ $$14\mathrm{.}00$ per unit at the

$29,000-$unit output level$),$ with the remainder being setup$-$related $($i$.$e$.,$ batch$-$level$)$ costs. Assume that the setup$-$related

costs increase in total with the number of batches produced and that the facility$-$level fixed costs do not vary in total, with

either the number of units produced or the number of batches produced during a period.

Part $1($Algo$)$

Required:

What is the total relevant cost of filling this special sales order?

What would be the change in operating income if the special order is accepted?

What is the breakeven selling price per unit for the special sales order $($i$.$e$.,$ what is the selling price that would result in a zero effect

on operating income$)?$

Prepare comparative income statements, using the contribution format, for both the current situation and assuming the special order

is accepted at the breakeven price determined in requirement $3.$

Complete this question by entering your answers in the tabs below.

Required $3$

Prepare comparative income statements, using the contribution format, for both the current situation and assuming the

special order is accepted at the breakeven price determined in requirement $3.$

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