The Gold Plus Company manufactures windows. Its manufacturing plant has the capacity to produce 6,000 windows each month. Current production...

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Accounting

The
Gold Plus
Company manufactures windows. Its manufacturing plant has thecapacity to produce
6,000
windows each month. Current production and sales are
5,000
windows per month. The company normally charges
$200
per window.
Variable costs that vary with number of units produced
Direct materials
$150,000
Direct manufacturing labor
75,000
Variable costs (for setups, materials handling, quality control,and so on) that vary with number of batches, 200 batches × $1,000per batch
200,000
Fixed manufacturing costs
200,000
Fixed marketing costs
25,000
Total costs
$650,000
Gold Plus
has just received a special? one-time-only order for
1,000
windows at
$175
per window. Accepting the special order would not affect the?company's regular business or its fixed costs.
Gold Plus
makes windows for its existing customers in batch sizes of
25
windows
?(200
batches? ×
25
windows per batch? =
5,000
?windows). The special order requires
Gold Plus
to make the windows in
10
batches of
100
windows.
1.
Should
Gold Plus
accept this special? order? Show your calculations.
2.
Suppose plant capacity were only
5,500
windows instead of
6,000
windows each month. The special order must either be taken in fullor be rejected completely. Should
Gold Plus
accept the special? order? Show your calculations.
3.
As in requirement? 1, assume that monthly capacity is
6,000
windows.
Gold Plus
is concerned that if it accepts the special? order, its existingcustomers will immediately demand a price discount of
$5
in the month in which the special order is being filled. They wouldargue that
Gold Plus?'s
capacity costs are now being spread over more units and thatexisting customers should get the benefit of these lower costs.Should
Gold Plus
accept the special order under these? conditions? Show yourcalculations.

Variable costs that vary with number of units produced
Direct materials	$150,000
Direct manufacturing labor	75,000
Variable costs (for setups, materials handling, quality control,and so on) that vary with number of batches, 200 batches × $1,000per batch	200,000
Fixed manufacturing costs	200,000
Fixed marketing costs	25,000
Total costs	$650,000

Answer & Explanation Solved by verified expert

3.9 Ratings (749 Votes)

Question 1 Without Accepting Special Order After Accepting Special Order Particulars Amount Amount Amount Amount Sales Revenue 1000000 1175000 Less Variable Costs Direct Materials 150000 180000 Direct Labour 75000 90000 Variable Manufacturing Cost 200000 210000 Total Variable Costs 425000 480000 Contribution Margin 575000 695000 Fixed Costs Fixed Manufacturing Costs 200000 200000 Fixed Marketing Costs 25000 25000 Total Fixed Costs 225000 225000 Operating Income 350000 470000 Contribution Margin Sales Total Variable See Answer

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