FROM Chapter 12 Slides pecial Order (old video may work)
Northern Optical ordinarily sells the X-lens for $50.
The variable production cost is $10, the fixed production cost is $18 per unit, and the
variable selling cost is $1. A customer has requested a special order for 10,000 units
of the X-lens to be imprinted with the customeràlogo. This special order would not
involve any selling costs, but Northern Optical would have to purchase an imprinting
machine for $50,000. Capacity in the plant is 60,000 units, current demand is 50,000
units. The customer is willing to pay $40 per unit. The imprinting machine has no
further use after this order.
1. Should they say yes to the special order? What is the profit?
2. What if the current demand was 60,000 units? Should they say yes to the
special order? What is the profit?
3. What is the current demand was 55,000 units? Should they say yes to the
special order? What is the profit?
EXERCISE 9 OOD Question
Preparing a Flexible Budget [LO3]
Auto Lavage is a Canadian company that owns and operates a large automatic carwash facility near
Quebec. The following table provides data concerning the companyàcosts:
Fixed Cost
per Month
Cleaning supplies
Electricity
$ 1,400
Maintenance
Wages and salaries
4,700
Depreciation
8,300
Rent
2,100
Administrative expenses
1,800
The company expects to charge customers an average of $5.90 per car washed.
Cost per
Car Washed
$ 0.70
0.10
0.30
0.40
0.05
Required:
Using Exhibit 9àas your guide, prepare a flexible budget for October assuming either 8,000 or 9,000
cars are washed.
To be done in excel maybe
EXERCISE 9` OOD Question
Flexible Budget Performance Report [LO3, LO4]
Page 364
Refer to the data in Exercise 9. Auto Lavageàactual level of activity was 8,100 cars. The actual
revenues and expenses for October are given below:
Sales
Variable expenses:
Cleaning supplies
Electricity
Maintenance
Wages and salary
Administrative
Fixed expenses:
Electricity
Wages and salaries
Depreciation
Rent
Administrative
Required:
Actual Data for
8,100 Cars
$49,300
6,075
891
2,187
3,402
486
1,450
4,700
8,300
2,100
1,745
1. Prepare a flexible budget performance report for October using Exhibit 9 as your guide.
2. Prepare a comprehensive performance report for October using Exhibit 9 as your guide. Assume
that the static budget for October was based on an activity level of 8,000 cars.
Extension of 11-14 – What is they want profit of $540,000 what is ROI? What is sales in dollars? What if they need
minimum ROI of 40%, what are sales and profit?

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