Reference no: EM133020263
Question - Ramos Corporation, a manufacturer of light bulbs, budgeted sales of 500,000 units of light bulbs at P100 per unit for the year 200A. Variable manufacturing costs was budgeted at P40 per unit and fixed manufacturing costs at P25 per unit.
A special order offering to buy 50,000 units of light bulbs for P58 each was received by Ramos Corporation in march 200A. Ramos Corp. has sufficient plant capacity to produce the additional units of light bulbs. However, overtime work has to be done at an additional cost of P8 per unit. No selling expense would be incurred for this special order.
-Should Ramos Corporation accept the special order, assuming that it would not affect regular sales? Yes, because operating income would increase by P 500,000.
-Assume that the available (excess) capacity for the special order is only 30,000 units, and that if the 50,000 units being ordered is accepted, Ramos Corporation would reduce its sales to the regular customers. Should the corporation accept the order?
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