Swisser Vase Company manufactures and sells vases.Great Products Company has offered Swisser Vase $16 per vase for 5,000 vases.Swisser Vase's normal selling price is $28 per vase.The total manufacturing cost per vase is $18 and consists of variable costs of $14 per vase and fixed overhead costs of $4 per vase.(NOTE: Assume excess capacity and no effect on regular sales.) Should Swisser Vase accept or reject the special sales order?

Question

Quizplus · Accepted Answer

The variable cost per vase is $14, and the offer is $16 per vase, resulting in a $2 contribution margin per vase. For 5,000 vases, this results in an increase in operating income of $10,000 (5,000 vases x $2). Fixed costs are not relevant as they do not change with the order.

Swisser Vase Company Manufactures and Sells Vases