Jones Corp. currently sells 50,000 units to its normal customers, but it has a capacity to produce 60,000 units. Its product sells for $60 per unit and the variable costs incurred in manufacturing and selling the product are as follows on a per unit basis: Direct materials - $12; Direct labor - $20; Sales commission - $4. A customer has proposed a special order to purchase 10,000 units at a special price of $45 per unit. If Jones accepts the order, the company would not have to pay its sales people their normal commission, but the company would incur a shipping cost of $7 per unit.
Required:
(1) If Jones accepts the special order, how would operating income is affected? __________
(2) What is the minimum price per unit below which Jones should reject the order? __________
(3) Assume that Jones is operating at full capacity. What is the minimum price per unit below which Jones should reject the order? _____

Question

Quizplus · Accepted Answer

The Answer of Jones Corp. currently sells 50,000 units to its normal customers, but it has a capacity to produce 60,000 units. Its product sells for $60 per unit and the variable costs incurred in manufacturing and selling the product are as follows on a per unit basis: Direct materials - $12; Direct labor - $20; Sales commission - $4. A customer has proposed a special order to purchase 10,000 units at a special price of $45 per unit. If Jones accepts the order, the company would not have to pay its sales people their normal commission, but the company would incur a shipping cost of $7 per unit.
Required:
(1) If Jones accepts the special order, how would operating income is affected? __________
(2) What is the minimum price per unit below which Jones should reject the order? __________
(3) Assume that Jones is operating at full capacity. What is the minimum price per unit below which Jones should reject the order? _____