Dapper Dan Produces a Man's Suit That Sells for $200

question 20

Essay

Dapper Dan produces a man's suit that sells for $200.Although the company's production capacity is 3,000 suits per year,only 2,500 suits are currently being produced and sold.At this level of production,the company incurs the following costs: $\begin{array}{|l|r|}\hline \text { Unit-level material cost per suit } & \$ 80 \\\hline \text { Unit-level labor cost per suit } & \$ 40 \\\hline \text { Unit-level overhead per suit } & \$ 20 \\\hline \text { Batch-level set-up cost for each batch of } 500 \text { suits } & \$ 1,200 \\\hline \text { Annual product-level costs } & \$ 15,000 \\\hline \text { Allocated facility-level costs } & \$ 50,000\\\hline\end{array}$ Easton Clothiers has offered to purchase 500 suits as a one-time special purchase at a price of $135.
Required:
Prepare a quantitative analysis that indicates whether the special order should be accepted.

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Definitions:

Gross Profit

The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.

Net Sales

The total revenue generated from goods or services sold, after deducting returns, allowances for damaged or missing goods, and discounts.

Cost of Goods Sold

Direct costs attributable to the production of the goods sold by a company, including materials and labor costs.

Merchandise Inventory

Goods that a retail or wholesale company intends to sell to customers. The inventory account is adjusted based on purchases and sales.