Indicate whether or not to accept the order for 3,000 bags

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Reference no: EM133434337

Question: Granja Boricua grows organic vegetables and sells them to restaurants in the central area of ??the island after processing. Assume that the farm's leading product for its restaurant customers is a mix of organic green salad ingredients prepared and ready to serve.

The company sells a large bag to restaurants for $30. The variable cost per bag is $22 (including $1 for delivery). The total sales to these customers is 10,000 bags per year.

Harvest conditions have been very good this season and Granja Boricua has extra capacity. A representative of a restaurant association has offered to buy 3,000 bags over the next month at $25 each to increase their regular supply during an international restaurant festival. The delivery cost of this special order will reduce the variable cost of each bag by $0.50.

Granja Boricua can accommodate most of this request, but if it accepts, it would have to sacrifice 100 bags of regular sales to complete the special order.

Using the differential analysis (relevant costs and benefits), indicate whether or not to accept the order for 3,000 bags. Present all your computations to justify your recommendation.

Reference no: EM133434337

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