Following some process redesign, Wild Birds in the Garden, Inc, has concluded that it can sell its new baffle for bird feeders at $15 per unit. Variable production costs will be $8.25 per unit. In addition, the company will incur total fixed costs associated with production of the baffle of $300,000 annually. Variable selling costs will add another $2.75 per unit.
Required:
a. Compute the breakeven volume of annual sales for the new baffle.
b. A discount chain, Dollar Lieutenant, approaches Wild Birds in the Garden with an offer to purchase 20,000 of the baffles at a reduced price of $12.50 per unit. These baffles could be produced in different colors to distinguish them from those that will be sold exclusively in Wild Birds in the Garden's franchised retail stores. Wild Birds in the Garden has sufficient capacity to fill the special order with no increase in fixed costs. It would also incur only $1.00 per unit of variable selling costs on these 20,000 units. Using incremental analysis, demonstrate whether or not it makes sense for Wild Birds in the Garden to accept this special order.

Question

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The Answer of Following some process redesign, Wild Birds in the Garden, Inc, has concluded that it can sell its new baffle for bird feeders at $15 per unit. Variable production costs will be $8.25 per unit. In addition, the company will incur total fixed costs associated with production of the baffle of $300,000 annually. Variable selling costs will add another $2.75 per unit.
Required:
a. Compute the breakeven volume of annual sales for the new baffle.
b. A discount chain, Dollar Lieutenant, approaches Wild Birds in the Garden with an offer to purchase 20,000 of the baffles at a reduced price of $12.50 per unit. These baffles could be produced in different colors to distinguish them from those that will be sold exclusively in Wild Birds in the Garden's franchised retail stores. Wild Birds in the Garden has sufficient capacity to fill the special order with no increase in fixed costs. It would also incur only $1.00 per unit of variable selling costs on these 20,000 units. Using incremental analysis, demonstrate whether or not it makes sense for Wild Birds in the Garden to accept this special order.

Following Some Process Redesign, Wild Birds in the Garden, Inc