Marin Company is currently producing 16,800 units per month, which is 77% of its production capacity. Variable manufacturing costs are currently $7.84 per unit. Fixed manufacturing costs are $56,320 per month. Marin pays a 9% sales commission to its sales people, has $29,470 in fixed administrative expenses per month, and is averaging $323,480 in sales per month.
A special order received from a foreign company would enable Marin Company to operate at 100% capacity. The foreign company offered to pay 73% of Marin's current selling price per unit. If the order is accepted, Marin will have to spend an extra $2.16 per unit to package the product for overseas shipping. Also, Marin Company would need to lease a new stamping machine to imprint the foreign company's logo on the product, at a monthly cost of $2,525. The special order would require a sales commission of $3,578.
Compute the following:
1. Units for special order. (Round your answer to 0 decimal places, e.g. 2,510.)
2. Foreign company's offered price per unit. (Round your answer to 2 decimal places, e.g. 5.25.)
3. What is the manufacturing cost of producing one unit of Marin's product for regular customers? (Round your answer to 2 decimal places, e.g. 5.25.)
4. Complete an incremental analysis of the special order. (If an amount is blank enter 0, all boxes must be filled to be correct. If the impact on net income is a decrease use either a negative sign preceding the amount, e.g. -45 or parenthesis, e.g. (45). Round your computations and final answers to 0 decimal places, e.g. 5,250. Enter all other amounts as positive and subtract where necessary.)
Reject Order Accept Order Net Income
Revenues
Costs
Variable Manufacturing
Sales commission
Shipping
Stamping machine
Total costs
Net income
Should management accept the order?
5. What is the lowest price that Marin could accept for the special order to earn net income of $1.18 per unit? (Round your answer to 2 decimal places, e.g. 5.25.)