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Special Order Pete's Pizza makes the best pizzas in town. Based on Pete's current volume, the price and cost breakdown is outlined below. The local high school has asked Pete to be their sole pizza provider for a large event and has offered to order 500 pizzas at a special price. Assuming Pete has the capacity to produce these pizzas, identify which of the following items are relevant in deciding whether to accept this special order. Per unit Relevant? $ 12.00 Normal sales price Special price 9.30 4.00 Direct materials Direct labor 3.00 Variable overhead 0.50 Fixed overhead 3.00 Should Pete accept the order in either of the following scenarios? A. Pete has capacity to produce these pizzas with no additional investments. B. Pete would need to rent a piece of equipment to accommodate the order. The rent would cost Pete: $ 2,380 For each scenario below, enter the relevant amounts of accepting this special order of 500 pizzas in total (not per unit): Scenario A B Enter "=0" in the cell for any cost not relevant to the decision. 500 Number of pizzas ordered Sales revenue Variable costs Direct materials Direct labor Variable overhead Fixed overhead Total costs Expected change in operating income Should Pete accept the order? 500

Special Order Pete's Pizza makes the best pizzas in town. Based on Pete's current volume, the price and cost breakdown is outlined below. The local high school has asked Pete to be their sole pizza provider for a large event and has offered to order 500 pizzas at a special price. Assuming Pete has the capacity to produce these pizzas, identify which of the following items are relevant in deciding whether to accept this special order. Per unit Relevant? $ 12.00 Normal sales price Special price 9.30 4.00 Direct materials Direct labor 3.00 Variable overhead 0.50 Fixed overhead 3.00 Should Pete accept the order in either of the following scenarios? A. Pete has capacity to produce these pizzas with no additional investments. B. Pete would need to rent a piece of equipment to accommodate the order. The rent would cost Pete: $ 2,380 For each scenario below, enter the relevant amounts of accepting this special order of 500 pizzas in total (not per unit): Scenario A B Enter "=0" in the cell for any cost not relevant to the decision. 500 Number of pizzas ordered Sales revenue Variable costs Direct materials Direct labor Variable overhead Fixed overhead Total costs Expected change in operating income Should Pete accept the order? 500

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Special Order Pete's Pizza makes the best pizzas in town. Based on Pete's current volume, the price and cost breakdown is outlined below. The local high school has asked Pete to be their sole pizza provider for a large event and has offered to order 500 pizzas at a special price. Assuming Pete has the capacity to produce these pizzas, identify which of the following items are relevant in deciding whether to accept this special order. Per unit Relevant? Normal sales price $ Special price 12.00 9.30 4.00 Direct materials Direct labor 3.00 Variable overhead 0.50 Fixed overhead 3.00 Should Pete accept the order in either of the following scenarios? A. Pete has capacity to produce these pizzas with no additional investments. B. Pete would need to rent a piece of equipment to accommodate the order. The rent would cost Pete: $ 2,380 For each scenario below, enter the relevant amounts of accepting this special order of 500 pizzas in total (not per unit): Scenario A B Enter "=0" in the cell for any cost not relevant to the decision. Number of pizzas ordered 500 Sales revenue Variable costs Direct materials Direct labor Variable overhead Fixed overhead Total costs Expected change in operating income Should Pete accept the order? Product Line Elimination Quiet Feet Inc. produces three different types of shoes. Complete the below contribution margin income statement for each product line. Allocate total fixed costs to each shoe type based on units as a percent of total units (i.e. use units sold as the cost driver). 500 11
Transcribed Image Text:Special Order Pete's Pizza makes the best pizzas in town. Based on Pete's current volume, the price and cost breakdown is outlined below. The local high school has asked Pete to be their sole pizza provider for a large event and has offered to order 500 pizzas at a special price. Assuming Pete has the capacity to produce these pizzas, identify which of the following items are relevant in deciding whether to accept this special order. Per unit Relevant? Normal sales price $ Special price 12.00 9.30 4.00 Direct materials Direct labor 3.00 Variable overhead 0.50 Fixed overhead 3.00 Should Pete accept the order in either of the following scenarios? A. Pete has capacity to produce these pizzas with no additional investments. B. Pete would need to rent a piece of equipment to accommodate the order. The rent would cost Pete: $ 2,380 For each scenario below, enter the relevant amounts of accepting this special order of 500 pizzas in total (not per unit): Scenario A B Enter "=0" in the cell for any cost not relevant to the decision. Number of pizzas ordered 500 Sales revenue Variable costs Direct materials Direct labor Variable overhead Fixed overhead Total costs Expected change in operating income Should Pete accept the order? Product Line Elimination Quiet Feet Inc. produces three different types of shoes. Complete the below contribution margin income statement for each product line. Allocate total fixed costs to each shoe type based on units as a percent of total units (i.e. use units sold as the cost driver). 500 11
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