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What is impact on profits of accepting this special order

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Problem - Great Oaks Farm grows organic vegetables and sells them to local restaurants after processing. The farms leading produce is Salad in a bag, which is mixed of organic salad green ingredients prepared ready to serve. The company sells a large bag to restaurants for $25. It calculates the variable cost per bag at $19, including $1, for delivery, and the average total cost per bag is $22. Because the vegetables are perishable and Great Oaks Farm is experiencing a large crop, the farm has extra capacity. Another company offers to purchase 2500 bags during the next month at $21 per bag. Delivery to the company cost $0.75 per bag. It can meet most of the request but would sacrifice 400 bags of regular sales to fill the special order.

a. What is the impact on profits of accepting this special order?

b. How would the analysis change if the special order were for 2500 bags per month for the next 5 years?

Reference no: EM133024908

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