Question

Option #1: New Customer Proposal I

Haley Company produces one product and has the capacity to make 150,000 units per month. The cost that is associated with producing 125,000 units is below.

Account	Per Unit	Cost at 125,000 units
Direct Materials	$ 20.00	$2,500,000.00
Direct Labor	$ 30.00	$3,750,000.00
Variable Manufacturing overhead	$ 10.00	$1,250,000.00
Fixed Manufacturing overhead	$ 15.00	$1,875,000.00
Variable selling and administrative expenses	$ 12.00	$1,500,000.00
Fixed selling and administrative expenses	$ 14.00	$1,750,000.00
Totals	$ 101.00	$12,625,000.00

The selling price per unit is $150. The Haley company was contacted by a prospective customer that interested in purchasing 25,000 units for $100. The management team is considering this offer and in the meeting about this new prospect you (the management accountant) stated that the fixed cost will remain the same, but the variable cost will increase along with $10 shipping expense due to the customer international location. Management has asked you to determine if they should accept or reject the new customer’s proposal and what nonmonetary factors should be considered.

Please submit the assignment in an Excel spreadsheet using the answer template linked here. Be sure to select the correct option using the appropriate tab at the base of the spreadsheet. Complete your response to upper management in a Word document. Your response should be at least one page in length. You must follow APA guidelines with respect to use of subheadings, have one-inch margins, and be double spaced. Format your paper according to the CSU-Global Guide to Writing & APA.

References must include the textbook plus two additional credible academic references. All sources used, including your textbook, must be referenced. Paraphrased and quoted material must have accompanying citations and be cited per APA guidelines. The CSU Global library is a good place to find references.

Answer 1

Haley Company
Statemenu showing acceptance or rejection of offer:
Offer Price			$100
Less: Relevant cost
Direct Material		20
Direct Labor		30
Variable Manufacturing overhead		10
Variable selling and administrative overhead		12
Shipping expenses		10	82
Net increase in profit			$18
No of units			25000
Total increase in profit			$450,000
Since profit will increase by $ 45000 .Hence, offer should be accepted.
Note:
Pl format the answer as required in the question.