Reference no: EM132992308
Question - Picaso Frameworks makes picture frames for artists. Its workshop has a capacity to produce 33,000 picture frames on a monthly basis. Its current production and sales per month is 30,000 frames and charges customers a rate of $450 a frame. The cost information for the current activity is given below:
Fixed manufacturing costs $900,000
Fixed marketing costs 825,000
Variable costs that vary with number of units produced:
Direct materials 1,050,000
Direct manufacturing labour 1,125,000
Variable costs (for setups, materials handling, quality control and so on) that vary with number of batches, 300 batches x $1000 per batch 300,000
Total costs $4,200,000
Picaso Frameworks has just received a special one-time-only order for 3,000 frames at $300 per frame. Accepting the special order would not affect the company's regular business. Picaso Frameworks makes frames for its existing customers in batches of 100 frames (300 batches x 100 frames per batch = 30,000 frames). The special order required Picaso Frameworks to make the frames in 50 batches of 60 frames.
A) Should Picaso Frameworks accept this special order? Justify your answer
B) Show your calculations in separate columns indicating costs without one-time only special order and costs with one-time only special order.
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