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Tom's Tables manufactures dining tables sold to retailers for $300 each. The plant capacity is 200,000...

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Accounting

Tom's Tables manufactures dining tables sold to retailers for $300 each. The plant capacity is 200,000 units annually, but normal volume is 150,000 units. The unit and total costs at normal volume are as follows:

Type of Cost

Unit Costs

Total Costs

Direct materials

$80.00

$12,000,000

Direct labor

$50.00

$7,500,000

Manufacturing support

$100.00

$15,000,000

Selling and administrative

$30.00

$4,500,000

Total costs

$260.00

$39,000,000

Fixed manufacturing support costs are $8,000,000, and fixed selling and administrative costs are $3,000,000.

A new client offers to buy 50,000 tables at $200 each, with bulk packaging reducing variable selling and administrative costs by 50%.

Required: Determine whether Tom's Tables should accept this special order. Prepare a cost-benefit analysis to support your decision.

Answer & Explanation Solved by verified expert
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