Forge Company Produces Cast-Iron Skillets This Special Order Would Require an Investment of $5,000 for Special

question 154

Multiple Choice

Forge Company produces cast-iron skillets.A local campground recently made a special order offer; the campground would like to purchase 1,000 skillets branded with their logo.Forge Company is currently producing and selling 20,000 skillets; the company has the excess capacity to handle this special order.The campground has offered to pay $30 for each skillet.An accountant at Forge Company provides an estimate of the unit product cost as follows: $\begin{array}{|l|lr|}\hline \text { Direct materials } & \$ & 6.00 \\\hline \text { Direct labor (variable) } & \$ & 3.50 \\\hline \text { Variable manufacturing overhead } & \$ & 1.00 \\\hline \text { Fixed manufacturing overhead } & \$ & 4.00 \\\hline \text { Total unit cost } & \$ & 14.50 \\\hline\end{array}$ This special order would require an investment of $5,000 for the molds required for the custom logo brand.These molds would have no other purpose and would have no salvage value.The special order skillets would also have an additional variable cost of $2.00 per unit associated with the custom logos.This special order would not have any effect on the company's other sales.If the special order is accepted,the company's operating income would increase (decrease) by:

• A)$ 19,500.
• B)$ 15,500.
• C)$ 10,500.
• D)$ 12,500.

---

Definitions:

Directive Leadership

A leadership style characterized by giving clear, explicit instructions and expecting compliance from team members.

Organizational Commitment

The extent to which an employee develops an attachment and feels a sense of loyalty to their employer.

South Korea

A country in East Asia, noted for its advanced technology, dynamic culture, and strong economy.

Gender Differentiation

The process of distinguishing roles, behaviors, or attributes based on an individual's gender, which can lead to gender-specific expectations and stereotypes.