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Aleks04 [339]
3 years ago
13

Minor Electric has received a special one-time order for 1,500 light fixtures (units) at $5 per unit. Minor currently produces a

nd sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3.00 variable cost and $1.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $1,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. Should the company accept the special order?
Business
2 answers:
7nadin3 [17]3 years ago
4 0

The company should accept the special order. This is the correct answer.

 

 

EXPLANATION

 

To determine whether to accept the offer or not, we first need to evaluate the profit the new offer brings. And the general rule is, profit = revenue – cost

 

If the new order is accepted, the revenue will increase by $5 x 2500 = $12,000.  

On the other hand, the cost of the current production and the new offer will be the same, $4.5, which consists of $1.5 fixed cost and $3 variable cost. Thus, the fixed cost will increase by $1000 to purchase the machine and the variable cost will increase by $3 x 2500 = $7000.

As a result, the overall profit will increase by $4000 from $12000 -$1000 - $7000.  

 

This is true if we assume that the company uses the whole 25% capacity (2500 units) left even if the new order is only for 1500 units. Therefore, the company should accept the new and special order.

 

LEARN MORE

If you’re interested in learning more about this topic, we recommend you to also take a look at the following questions:

Profit equals the total amount of money made minus? brainly.com/question/11410118  

Business leaders begin vertical integration: brainly.com/question/13157817  

KEYWORD: special order, fixed cost, production

Subject: Business

Class: 10-12

Subchapter: Cost

Maslowich3 years ago
3 0
The company should accept the special order because it will get an additional profit of $4,000 ($12,500 - $7,500 - $1,000) for the special order. This additional profit amount can be acquired by separating the effect from the special order on each cost and sales of the company's business. The sales should increase by $12,500 ($5 x 2500 unit) amount if the job is taken and the variable cost should increase by $7,500 ($3 x 2500 unit). Lastly, the fixed cost should increase by $1,000 (the new machine).
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Necesito saber si es cierto o falso
Zanzabum

La respuesta correcta es Falso

Explicación:

El excedente de producción se refiere a la cantidad de dinero que obtiene un productor al producir y vender un producto. En este contexto, el excedente de producción puede ser calculado si al precio o valor de compra se resta el costo de oportunidad de producirlo (costo por producir un bien específico en vez de sus alternativas), así como otros costos de producción. De acuerdo a lo anterior la premisa es falsa porque el costo de oportunidad debe ser restado y no sumado al precio para saber cual fue la ganancia o excedente de producción.

6 0
2 years ago
Your friend has $80 when he goes to the fair. He spends $4 to enter the fair and $12 on food. Rides at the fair cost $1.25 per r
padilas [110]

Answer:

f(x) = -1.25x + 64 I hope this helps :)

Explanation:

total amount of money: $80

He spent $16 for the entrance of the fair and food.

80-(4+12) = 64

After that you subtract $1.25 per ride = -1.25x

Then it gives the function:

f(x) = -1.25x + 64

6 0
3 years ago
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lord [1]

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the farm would face trade offs in production of apples or oranges

Explanation:

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8 0
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8 0
3 years ago
Read 2 more answers
A journal entry that debits Raw Materials and credits Accounts Payable is recording the ______.
lbvjy [14]

When you see a journal entry that leads to a debit of Raw Materials and a credit of Accounts Payable, this is a<u> C. purchase of materials. </u>

<h3 /><h3>What happens when materials are purchased?
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As materials are an asset, the raw materials account will be debited to show that raw materials are increasing.

If the Accounts Payable is credited, it means that it is increasing as well because it is a liability. The transaction was therefore done by buying the materials on credit.

In conclusion, option C is correct.

Find out more on raw materials purchases at brainly.com/question/26446159.

5 0
2 years ago
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