Rippey Corporation manufactures a single product with the following unit costs for 5,000 units: ...
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Accounting
Rippey Corporation manufactures a single product with the following unit costs for 5,000 units:
Direct materials
$ 60
Direct labor
30
Factory overhead (40% variable)
90
Selling expenses (60% variable)
30
Administrative expenses (20% variable)
15
Total per unit
$225
Recently, a company approached Rippey Corporation about buying 1,000 units for $225. Currently, the models are sold to dealers for $412.50. Rippey's capacity is sufficient to produce the extra 1,000 units. No additional selling expenses would be incurred on the special order.
Required:
A.
What is the profit earned by Rippey Corporation on the original 5,000 units?
B.
Should Rippey accept the special order if its goal is to maximize short-run profits? How much will income be affected?
C.
Determine the minimum price Rippey would want to receive in order to increase profits by $7,500 on the special order.
D.
When making a special-order decision, what qualitative aspects of the decision should Rippey Corporation consider?
.
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