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Quality Products Produces and Sells Screen-Printed T-Shirts to Local Organisations

Question 73

Essay

Quality Products produces and sells screen-printed t-shirts to local organisations.The normal sales price per shirt is $12.Due to setup costs,they only accept orders of at least 100 shirts.The setup cost per order is $40 and the variable costs per shirt are $3.Fixed overhead costs per month total $2000.Quality Products has the capacity to screen-print as many as 5000 shirts per month,but is currently producing around 3000.On 1 May,the company was approached by a local non-profit group who wishes to place a single order for 100 shirts.The non-profit group has indicated that they can only pay $5 per shirt.
Required:
A. List two qualitative factors that should be considered by Quality Products before accepting the special order.
B. What are the total relevant costs of accepting the special order?
C. From a quantitative basis, should they accept the special order? By what amount will Quality Product's net income increase or decrease if they accept the special order?

Correct Answer:

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A. The qualitative factors that should b...

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