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Should creda accept the special order

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Reference no: EM132594643

Creda Company produces bathroom sink for home builders in Seattle. The cost of producing 5,000 bathroom sinks is as follows:

Direct Materials                                        $ 550,000

Direct Labour                                           250,000

Variable Manufacturing Overhead                100,000

Fixed Manufacturing Overhead                    400,000

Total                                                   $1,250,000

Creda also incurs selling expenses of $5 per bathroom sink. Wellington Corp. has offered Creda $195 per cabinet for a special order of 1,000 bathroom sinks. Creda has available capacity to do the work.

Instructions:

Question (a). Prepare incremental analysis for the special order.

Question (b). Should Creda accept the special order? Why or why not?

Reference no: EM132594643

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