Hopkins manufactures a single product with the following full unit costs for 6,000 units:
Direct materials
$ 80
Direct labor
40
Manufacturing overhead (40% variable)
120
Selling expenses (60% variable)
40
Administrative expenses (10% variable)
20
Total per unit
A company recently approached Hopkins with a special order to purchase 1,000 units for $275. Hopkins currently sells the models to dealers for $550. Current capacity is sufficient to produce the extra 1,000 units without an increase in fixed costs. No selling expenses would be incurred on the special order.
Required (each item below is independent of the others)
a. Ignoring the special order, determine Hopkins' profit on production and sales of 6,000 units. Ignore taxes in these analyses.
b. Should Hopkins accept the special order if its goal is to maximize short-run profits? Determine the dollar amount of the impact on profit of accepting the order.
c. Determine the minimum price Hopkins would want to receive if the goal is to increase before tax profits by $30,000 on the special order of 1,000 units.
d. When making a special order decision, what non-quantitative aspects of the decision should Hopkins consider? (List at least 3)