Elmwood Environmental manufactures compost kits. For the past year, the company reported the following operating results while operating at 50% of plant capacity: An analysis of costs and expenses reveals that variable cost of goods sold is $95 per unit and variable operating expenses are $35 per unit. In January, Elmwood Environmental receives a special order for 500 compost kits at $135 each from a local municipality.Acceptance of the order require an addition $1,000 of shipping costs, but would not affect the fixed expenses.
a. Prepare an analysis to determine if the special order should be accepted.
b. What decision should Elmwood make regarding the special order, accept or reject? Explain.

Question

Elmwood Environmental manufactures compost kits. For the past year, the company reported the following operating results while operating at 50% of plant capacity:  An analysis of costs and expenses reveals that variable cost of goods sold is $95 per unit and variable operating expenses are $35 per unit. In January, Elmwood Environmental receives a special order for 500 compost kits at $135 each from a local municipality.Acceptance of the order require an addition $1,000 of shipping costs, but would not affect the fixed expenses. 
a. Prepare an analysis to determine if the special order should be accepted.
b. What decision should Elmwood make regarding the special order, accept or reject? Explain.

Quizplus · Accepted Answer

The Answer of Elmwood Environmental manufactures compost kits. For the past year, the company reported the following operating results while operating at 50% of plant capacity:  An analysis of costs and expenses reveals that variable cost of goods sold is $95 per unit and variable operating expenses are $35 per unit. In January, Elmwood Environmental receives a special order for 500 compost kits at $135 each from a local municipality.Acceptance of the order require an addition $1,000 of shipping costs, but would not affect the fixed expenses. 
a. Prepare an analysis to determine if the special order should be accepted.
b. What decision should Elmwood make regarding the special order, accept or reject? Explain.

Elmwood Environmental Manufactures Compost Kits