Hardbody Phone Inc. produces high quality, durable protective cases for a variet

Question

Hardbody Phone Inc. produces high quality, durable protective cases for a variety of cellular phones. The company just received a special order to produce 450 units of a modified case for a specific phone model. The unit cost for the regular case is $33 ($23 in total for variable costs and $10 for allocated fixed manufacturing overhead that is common to the company). A regular case is priced at $49/unit. Extra costs for the modified case would be as follows: - Extra paint and plastic required for the modified case costs $3 per unit. - Adjustments to the design of the modified case costs $2,600 (a one-time cost). The price charged for a modified case is $58/unit. For each modified case produced and sold, the production and sale of a regular case must be given up. (i.e. Hardbody Phone is currently operating at full capacity). Should the company accept the order for the modified cases? Do not enter dollar signs or commas in the input boxes. Round Fixed Cost per Unit and Total Relevant Cost to 2 decimal places. The "check" button does not submit your attempt. To submit the attempt, go to the end of the quiz and click on the "submit all and finish" button.

Explanation / Answer

Selling price 49 Less variable cost 23 Contribution 26 less fixed cost 10 Net Income 16 Incremental Selling price 58 9 Variable regular 23 extra paint & plastic 3 26 3 Contribution per unit 32 6 Fixed Manufacturing 10 Adjustment to design 5.78 15.78 5.78 Net income 16.22 0.22 Foregone contribution margin per unit 26 Variable cost per unit 3 Fixed cost per unit 5.78 Total relevant cost 34.78 Accept the order as the contribution per unit increases by modifying the case

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