Sherene nili manages a company that produces wedding gowns

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Reference no: EM13596659

Sherene Nili manages a company that produces wedding gowns. Sheproduces both a custom product that is made to order and a standardproduct that is sold in bridal salons. Her accountant prepared thefollowing forecasted income statement for March, which is a busymonth: Ms. Nili already has orders for the 10 custom dresses reflectedin the March forecasted income statement. The depreciation chargesare for machines used in the respective product lines. Machinesdepreciate at the rate of $1 per hour based on hours used, so theseare variable costs. In March, cutting and sewing machines areexpected to operate for 900 hours, of which 600 hours will be usedto make custom dresses. The rent is for the building space, whichhas been leased for several years at $7,000 per month. The rent,heat, and light are allocated to the product lines based on theamount of floor space occupied. A valued customer, who is a wedding consultant, has asked Ms.Nili for a special favor. This customer has a client who wants toget married in early April. Ms. Nili's company is working atcapacity and would have to give up some other business to make thisdress. She can't renege on custom orders already agreed to,but she can reduce the number of standard dresses produced in Marchto 10. Ms. Nili would lose permanently the opportunity to make upthe lost production of standard dresses because she has no unusedcapacity for the foreseeable future. The customer is willing to pay$25,000 for the special order. Materials and labor for the orderwill cost $6,000 and $10,000, respectively. The special order wouldrequire 140 hours of machine time. Ms. Nili's company wouldsave 150 hours of machine time from the standard dress businessgiven up. Rent, heat and light, and other production costs wouldnot be affected by the special order. ]

Required

A: Should Ms. Nili take the order? Explain your answer.

B: What is the minimum price Ms. Nili should accept to take the special order?

C:What are the other factors, if any, besides price that she should consider"

Reference no: EM13596659

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