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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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