The Clock Builder Makes Grandfather Clock Kits That It Sells

question 78

Essay

The Clock Builder makes grandfather clock kits that it sells to hobbyists who then assemble and finish the clocks.The company has the capacity to make 5,000 of the kits,and its current volume is 3,000 kits.The costs of a clock kit are $300 for unit-level materials,$200 for unit-level labor,and $150 for an allocation of facility-level overhead.The normal selling price is $950.The Clock Builder has received a special order for 600 clock kits at a price of $600 each.
Required:
Should The Clock Builder accept the special order? Support your answer with appropriate computations.

---

Definitions:

Average Book Value

The mean value of an asset or investment determined by its original cost minus depreciation or amortization.

Average Cash Inflow

The mean amount of money received by a company over a defined period, typically calculated for assessment or planning purposes.

Average Net Income

The mean amount of revenue remaining after all expenses, taxes, and costs have been deducted over a certain period.

Net Present Value

A calculation that estimates the present value of all future cash flows of an investment, minus the initial investment cost.