APS has offered to purchase 75,000 running sneakers for their elementary school students at a price...
APS has offered to purchase 75,000 running sneakers for their elementary school students at a price of $40. The APS Board would like NIKE to add a special logo on the sneakers, which would add an additional cost of $10 per shoe. NIKE's information regarding the sneakers is provided below. NIKE has excess capacity to fulfill the special order. If NIKE accepts the special order, what is the change in Net Operating Income? Thus, should NIKE accept or reject the special order?
Direct material 15
direct labor 13
MOH variable 7
MOH fix 9
Homework Answers
| Per unit | Total 75000 units | |
| Incremental revenue | 40 | 3000000 |
| Incremental costs: | ||
| Direct materials | 15 | 1125000 |
| Direct labor | 13 | 975000 |
| Variable manufacturing overhead | 7 | 525000 |
| Additional cost | 10 | 750000 |
| Total Incremental costs | 3375000 | |
| Incremental net operating income(loss) | (375000) | |
| Net Operating Income will decrease by $375,000 | ||
| Thus,NIKE should reject the special order | ||
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APS has offered to purchase 75,000 running sneakers for their
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