On November 15,20xx,The Cooper Co

question 59

Essay

On November 15,20xx,The Cooper Co.received a special order for 6,000 three-wood golf club sets.These golf clubs will be marketed in Asia.Seto Imports,Inc.,the purchasing company,wants the clubs bulk packaged and is willing to pay $72 per set for the clubs.The president of The Cooper Co.has gathered the following product costing information about the set of woods being discussed: direct materials (wood),$900 per 100 sets; direct materials (metal shafts),$1,200 per 100 sets; and direct materials (grips),$200 per 100 sets.Direct labor is $27 per set.Variable manufacturing costs are $19 per set,and fixed manufacturing costs are 20 percent of direct labor dollars.Variable selling expenses are $14 per set,and variable shipping costs are $9 per set.Fixed general and administrative costs are figured at 30 percent of direct labor dollars.Bulk shipping costs will total $10,000,thus eliminating both variable selling and variable shipping costs from consideration.The company did not expect this order and will reach planned production capacity for the year.However,there is enough plant capacity for the special order.Round answers to two decimal places.
a. Prepare an analysis for the president to use in deciding whether to accept or reject the offer by Seto Imports, Inc. What decision should be made?
b. What is the lowest possible price The Cooper Co. could charge per set of woods and still make a $12,000 profit on this order?

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Definitions:

Supply Curve

A graph that shows the relationship between the price of a good and the quantity of the good that producers are willing to sell.

Total Surplus

The sum of consumer surplus and producer surplus, representing the total benefit to society from the production and consumption of goods and services.

Transplant Organs

Organs removed from one body and placed in another's body for the purpose of replacing a missing or defective organ.

Market

An economic system where goods and services are freely exchanged between buyers and sellers under competitive conditions.