Should case hardware accept or reject the offer

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Reference no: EM131594961

Problem - Case Hardware sells tiling grout among other products. Their 201T grout merchandise sales is as follows:

Kilograms produced and sold

625,000 kg

Sales revenue

$4,960,000

Variable manufacturing expense

2,325,000

Fixed manufacturing expense

1,308,000

Variable selling and administrative expense

356,000

Fixed selling and administrative expense

412,000

Net operating income

$559,000

Due to storage limitations, Case Hardware's annual storage and sales capacity is 700,000 kg.

Suppose, in 2018, a customer offered to pay $6.00 per kg for a special order of 70,000 kg, should Case Hardware accept or reject the offer. In reaching your answer, assume the company has already committed to sell 675,000 kg of grout for the year. (Please explain your answer).

Reference no: EM131594961

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