Problemsportsmart produces and sells sweatshirts to local, Ask an Expert

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Sportsmart produces and sells sweatshirts to local organizations. The normal sales price per shirt is $15. Due to setup costs, they only accept orders of at least 50 shirts. The setup cost per order is $25 and the variable costs per shirt are $3.00. Fixed overhead costs per month total $1,000. The company has the capacity to screen-print as many as 2,500 shirts per month, but is currently producing around 1,500. On May 1, 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 the company before accepting the special order.

B. From a quantitative basis, should they accept the special order? By what amount will the company's net income increase or decrease if they accept the special order?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92815052

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