Directions: Your assignment this week is to answer the below three questions. Please note that question #1 has 2 parts, part a and part b and question #2 has 3 parts, part a, part b and part c. Please show your work for full credit and use the box provided. Please add more rows or columns to the box if needed. |
1. Palmer's Gourmet Chocolates produces and sells assorted boxed chocolates. The unit selling price is $50, unit variable costs are $25, and total fixed costs are $2,000. |
1a. How many boxes of chocolates must Palmer's Gourmet Chocolates sell to breakeven? |
1b. What are breakeven sales in dollars?
2. Extreme Sports received a special order for 1,000 units of its extreme motorbike at a selling price of $250 per motorbike. Extreme Sports has enough extra capacity to accept the order. No additional selling costs will be incurred. Unit costs to make and sell this product are as follows: Direct materials, $100; direct labor, $50; variable manufacturing overhead, $14; fixed manufacturing overhead, $10, and variable selling costs, $2.
2a. List the relevant costs.
2b. What will be the change in operating income if Extreme Sports accepts the special order?