Surly Company Makes Small Boats Required:
A) Should Surly Company Reject the Special Order

question 33

Essay

Surly Company makes small boats.The company produces and sells 5,500 boats per year at a selling price of $160 per boat.Surly Company has excess capacity and is trying to get special orders.A new retailer wants to purchase 1,000 boats for $125 per boat.Surly Company is going to decline the special order because it costs $130 to make a single boat as seen below:
$\begin{array}{ll}\text { Direct materials } & \$ 50 \text { per unit } \\\text { Direct manufacturing labor } & \$ 55 \text { per unit } \\\text { Variable manufacturing overhead } & \$ 10 \text { per unit } \\\text { Fixed manufacturing overhead } & \$ 15 \text { per unit } \\\text { Total } & \$ 130 \text { per unit }\end{array}$
Required:
A) Should Surly Company reject the special order from the new retailer? Why?
B) How much will Surly's net income increase with the special offer?

• A) Should Surly Company reject the special order from the new retailer? Why?
• B) How much will Surly's net income increase with the special offer?

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Definitions:

Dexron II

A type of automatic transmission fluid specified by General Motors, suitable for use in vehicles requiring this particular grade.

CX Family

Generally refers to a series or family of vehicles, products, or technologies, often characterized by a common design, features, or purpose. Without more context, it's too broad to specify further.

WT Transmission

WT Transmission, if referring to a specific technology or model, could denote a specialized transmission system; however, without further context, the exact nature of "WT Transmission" is unclear.

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A phrase referring to the engagement of a clutch, which connects two rotating shafts or a rotating shaft to a stationary component, allowing power transfer.