A Company Is Currently Operating at 70% Capacity Producing 8,000

question 132

Essay

A company is currently operating at 70% capacity producing 8,000 units.Cost information relating to this current production is shown in the following table:
$$\begin{array} { | l | r | } \hline & \text { Per Unit } \\\hline \text { Sales price } & \$ 15 \\\hline \text { Direct material } & \$ 3.20 \\\hline \text { Direct labor } & \$ 7.10 \\\hline \begin{array} { l } \text { Variable } \\\text { overhead }\end{array} & \$ 0.05 \\\hline \text { Fixed overhead } & \$ 0.60 \\\hline\end{array}$$
The company has been approached by a customer with a request for a special order for 1,500 units.The sales price per unit for this special order is $10.Should the company accept the special order?

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Definitions:

Factor

Another word for the independent variable of interest.

ANOVA

Analysis of Variance, a statistical method used to compare means among three or more groups to see if at least one is different.

Mean Square

A statistical measure used to describe the dispersion of values in a data set, typically calculated by dividing the sum of the squares of deviations from the mean by the number of observations.

Error

In statistics, error refers to the difference between a measured or inferred value and its true value.