Reference no: EM131722436
Question - Camino Company manufactures designer togo coffee cups. Each line of coffee cups is endorsed by a high profile celebrity and designed with special elements selected by the celebrity. During the most recent year, Camino Company had the following operating results while operating at 80 percent (96,000 units) of its capacity:
Sales revenue $960,000
Cost of goods sold 492,000
Gross profit $468,000
Operating expenses 36,000
Net operating income $432,000
Camino's cost of goods sold and operating expenses are 80 percent variable and 20 percent fixed. Camino has received an offer from a professional wrestling association to design a coffee cup endorsed by its biggest star and produce 20,000 cups for $8 each (total $160,000). These cups would be sold at wrestling matches throughout the United States. Acceptance of the order would require a $60,000 endorsement fee to the wrestling star, but no other increases in fixed operating expenses.
Required: Complete the incremental analysis of the special order in the table provided below. (Enter per unit answers to 2 decimal places.)
Per cup Total
Incremental Revenue 8.00 160,000
Less: Incremental Costs
Variable COGS
Variable Operating Expenses
Endorsement Fee 60,000
Incremental Profit
2. Should Camino accept this special order?
No
Yes
3. If Camino were operating at full capacity, what price would Camino require for the special order?