Question

Exhibit 1 WePRINT COMPANY Summary of Monthly Operating Costs Monthly costs at 150,000 volume Manufacturing costs: Direct material - variable $ 4,500 Direct labor - variable 1,500 Direct labor - fixed 3,000 Manufacturing overhead - variable 1,500 Manufacturing overhead - fixed 3,375 Total manufacturing costs $15,375 Nonmanufacturing costs: Sales - variable 1,500 Sales - fixed 1,875 Corporate - fixed 3,750 Total nonmanufacturing costs Total costs $ 7,125 $22 500 ,. 1. Consider the special order from Abbie Philips. a. WePrint currently is operating at around full capacity: 150,000 brochures. Should Wilson accept the special order and what would be the dollar impact on Operating Income if the order was accepted

Answer 1

Question Completion:

Abbie Phillips has a special order for 100 prints at $10.

Answer:

WePRINT COMPANY

Since the company has not reached full capacity, it should accept the order.  It will bring in an additional revenue of $1,000 and an additional operating income of $995.

Explanation:

a) Data and Calculations:

Summary of Monthly Operating Costs

Monthly costs at 150,000 volume

Manufacturing costs:

Direct material - variable                 $ 4,500

Direct labor - variable                          1,500

Direct labor - fixed                              3,000

Manufacturing overhead - variable    1,500

Manufacturing overhead - fixed        3,375

Total manufacturing costs             $15,375

Nonmanufacturing costs:

Sales - variable                                   1,500

Sales - fixed                                        1,875

Corporate - fixed                               3,750

Total nonmanufacturing costs       $ 7,125

Total costs                                    $22 500

Manufacturing costs:                       150,000  Per Unit   Relevant Cost/Unit

Direct material - variable                 $ 4,500   $0.03               $0.03

Direct labor - variable                          1,500      0.01                  0.01

Direct labor - fixed                              3,000     0.02                

Manufacturing overhead - variable    1,500      0.01                  0.01

Manufacturing overhead - fixed        3,375      0.02

Total manufacturing costs             $15,375      0.09                 0.05

Nonmanufacturing costs:

Sales - variable                                   1,500       0.01

Sales - fixed                                        1,875       0.01

Corporate - fixed                               3,750      0.03

Total nonmanufacturing costs       $ 7,125      0.05

Total costs                                    $22 500       0.14                 0.05