special order decision at full capacity the following monthly financial data are for 1571362

Special Order Decision at Full Capacity. The following monthly financial data are for Green Mowers, Inc., a maker of electric lawn mowers. On average, Green Mowers makes 5,000 mowers each month.

Green Mowers received an offer from a one-time customer to purchase 1,000 mowers this coming month for $180 per unit. Green Mowers can produce up to 5,000 units a month, so the special order would reduce regular customer sales. Variable costs per unit will remain at $150. This special order will have no effect on fixed costs.

Required:

a. Using the differential analysis format presented in , determine whether Green Mowers would be better off rejecting the special order (Alternative 1) or accepting the special order (Alternative 2).

b. Summarize the result of accepting the special order using the format presented in .

c. Assume Green Mowers can increase capacity to accommodate the special order by paying an additional $20 in variable costs per unit (for overtime pay) for the additional 1,000 units. With this increased capacity, the special order would not affect regular customer sales. Using the differential

analysis format presented in , determine whether Green Mowers would be better off rejecting (Alternative 1) or accepting (Alternative 2) the special order.

d. Summarize the result of accepting the special order in requirement c using the format presented in .