Willy Water Company has received a request for a special order of units for its best selling water bottle. The normal selling price is provided below. Each of the units would need to be modified to include the customer's logo. The normal product cost for the water bottle is computed as follows:
Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The cost to include the logo will require an increase to variable costs and the purchase of a new machine that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.
Increase to variable costs per unit $ 1.15
Purchase price of new machine $ 20,000
What is the incremental revenue of accepting the special order?
What are the incremental costs of accepting the special order?
What is the lowest price the company should charge per bottle for the special order (round answer to 2 decimal places, ex. 9.99)?
Should the company accept the special order?
○ Yes
○ No
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