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Exercise 6-7A (Algo) Special order decision LO 6-2 Rooney Company manufactures a personal computer designed for use in schools and markets it under its own label. Rooney has the 34.000 units a year but is currently producing and selling only 14,000 units a year. The computer's normal selling price is $1,750 per unit with no volume discounts. The unit-level costs of the computer's production are $510 for direct materials, $160 for direct labor, and $120 for indirect unit-level manufacturing costs. The total product- and facility-level costs incurred by Rooney during the year are expected to be $2,250,000 and $816,000, respectively. Assume that Rooney receives a special order to produce and sell 3,180 computers at $1,280 each. Required Calculate the contribution to profit from the special order. Should Rooney accept or reject the special order? Answer is complete but not entirely correct. Contribution to profit Should Rooney accept or reject the special order? 1.161 800 X Accept Walton Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Walton produces and sells only 7700 bikes each year. Due to the low volume of activity, Walton is unable to obtain the economies of scale that larger producers achieve. For example, Walton could buy the handlebars for $32 each: they cost $35 each to make. The following is a detailed breakdown of current production costs. Item Unit Cost Total $15 Unit-level costs Materials Labor Overhead Allocated facility-level costs Total $115,500 61,600 15,400 77,000 $269,500 After seeing these figures, Walton's president remarked that it would be foolish for the company to continue to produce the handlebars at $35 each when it can buy them for $32 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Total Per Unit Total relevant cost Do you agree with the president's conclusion

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