Country cap company ccc manufactures and sells ball caps, Ask an Expert

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Country Cap Company (CCC) manufactures and sells ball caps with a special logo on the back of the cap that it has copyrighted. CCC sells its caps through many retail outlets and it has a set price of $23.00. Recently, the National Basketball Association (NBA) has approached CCC with an offer to to purchase 10,000 caps for $170,000 for this year's NBA Playoffs. The NBA caps require the use of NBA's own logo and will cause CCC to purchase a special machine and set-up costing $10,000 with no apparent future use or value (the machine imprints the 2011 championship winning team logo). CCC cost structure for the production of its caps is as follows:

Direct material: $7.00

Direct labor:....$2.00

Manufacturing Overhead: $8.00

In addition to the costs above, the special logo application will cost $2.00 per cap. While most of the Manufacturing Overhead is fixed, Variable Overhead is estimated at $3.00 per cap. It is expected that this order can be fulfilled within the existing capacity of CCC and will not affect existing sales.

Required: What will be the affect on income if CCC accepts this order? Based on your answer of income, should CCC accept the order? Show all your work for point consideration.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9946034

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