Emily's Electronics produces wireless speakers sold to distributors for $50 each. The plant capacity is 500,000...
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Accounting
Emily's Electronics produces wireless speakers sold to distributors for $50 each. The plant capacity is 500,000 units annually, but normal volume is 400,000 units. The unit and total costs at normal volume are as follows:
Type of Cost
Unit Costs
Total Costs
Direct materials
$15.00
$6,000,000
Direct labor
$10.00
$4,000,000
Manufacturing support
$12.00
$4,800,000
Selling and administrative
$8.00
$3,200,000
Total costs
$45.00
$18,000,000
Fixed manufacturing support costs are $3,500,000, and fixed selling and administrative costs are $1,800,000.
A prospective customer offers to purchase 75,000 units at $35 each, with simplified packaging reducing variable selling and administrative costs by 40%.
Required: Evaluate if Emily's Electronics should accept this special order. Prepare a break-even analysis to determine the minimum order size that would be acceptable.
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