Solution-Determine whether the company should produce

Determine whether the company should produce special order

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Question - ABC Company has annual productive capacity of 70000 units per year. The annual sales are 55000 units. The selling price is $8. The variable cost for manufacturing is $4.40 and the variable selling cost per unit is $1.20 Estimated fixed cost for 2019 are as follows:

Fixed Cost Manufacturing $95000

Selling & administrative $50000

A manufacturer from another country wants to buy 7000 units at a price of $6.00 per unit. All fixed cost will remain within the relevant range. Variable manufacturing costs would be the same per unit, but variable selling cost would increase by $1.50 per unit for the special order only.

REQUIRED -

1. Determine whether the company should produce the special order.

2. Assuming XYZ company's objective is to maximize profit, if the customer wants a special order of 27000 units, should XYZ company accept or reject special order.

Reference no: EM132561780

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Determine whether the company should produce special order

Reference no: EM132561780

Reference no: EM132561780

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