Liam's Lamps manufactures designer lamps sold to furniture stores for $75 each. The plant capacity is...
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Accounting
Liam's Lamps manufactures designer lamps sold to furniture stores for $75 each. The plant capacity is 150,000 units annually, but normal volume is 100,000 units. Unit and total costs at normal volume are:
Type of Cost
Unit Costs
Total Costs
Direct materials
$20.00
$2,000,000
Direct labor
$15.00
$1,500,000
Manufacturing support
$20.00
$2,000,000
Selling and administrative
$10.00
$1,000,000
Total costs
$65.00
$6,500,000
Fixed manufacturing support costs are $1,500,000, and fixed selling and administrative costs are $700,000.
A customer offers to buy 30,000 units at $55 each, with reduced packaging lowering variable selling and administrative costs by 50%.
Required: Evaluate if Liam's Lamps should accept the special order. Prepare a financial impact analysis to support your decision.
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