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Question 1 (9 marks):The Bruning Company has the following budgeted income statement for the month of May 2014.Sales (40,000 units) $2,000,000Cost of goods sold:Direct materials $300,000Direct labour 400,000Variable overhead 200,000Fixed overhead 600,000 1,500,000Gross profit margin 500,000Selling & administrative costs:Sales commissions (2% of sales 40,000Delivery costs 20,000Sales salaries 120,000Administrative salaries 100,000Office rental 70,000 350,000Operating income $ 150,000The plant has a maximum capacity of 50,000 units. A company salesperson has brought an offer from a new customer to purchase the product at a price of $35.00 per unit. The customer will pick up the order at Bruning’s factory.Required:1. Analyse the consequences for the company if they accepted the new order and:a. the customer wished to purchase 8,000 units only. [3 marks]b. the customer wished to purchase 14,000 units only. [4 marks]2. What qualitative factors should the company consider in making this type of decision?[2 marks]

Question 1 (9 marks):The Bruning Company has the following budgeted income statement for the month of May 2014.Sales (40,000 units) $2,000,000Cost of goods sold:Direct materials $300,000Direct labour 400,000Variable overhead 200,000Fixed overhead 600,000 1,500,000Gross profit margin 500,000Selling & administrative costs:Sales commissions (2% of sales 40,000Delivery costs 20,000Sales salaries 120,000Administrative salaries 100,000Office rental 70,000 350,000Operating income $ 150,000The plant has a maximum capacity of 50,000 units. A company salesperson has brought an offer from a new customer to purchase the product at a price of $35.00 per unit. The customer will pick up the order at Bruning’s factory.Required:1. Analyse the consequences for the company if they accepted the new order and:a. the customer wished to purchase 8,000 units only. [3 marks]b. the customer wished to purchase 14,000 units only. [4 marks]2. What qualitative factors should the company consider in making this type of decision?[2 marks]

Question 1 (9 marks):The Bruning Company has the following budgeted income statement for the month of May 2014.Sales (40,000 units) $2,000,000Cost of goods sold:Direct materials $300,000Direct labour 400,000Variable overhead 200,000Fixed overhead 600,000 1,500,000Gross profit margin 500,000Selling & administrative costs:Sales commissions (2% of sales 40,000Delivery costs 20,000Sales salaries 120,000Administrative salaries 100,000Office rental 70,000 350,000Operating income $ 150,000The plant has a maximum capacity of 50,000 units. A company salesperson has brought an offer from a new customer to purchase the product at a price of $35.00 per unit. The customer will pick up the order at Bruning’s factory.Required:1. Analyse the consequences for the company if they accepted the new order and:a. the customer wished to purchase 8,000 units only. [3 marks]b. the customer wished to purchase 14,000 units only. [4 marks]2. What qualitative factors should the company consider in making this type of decision?[2 marks]

Question 1 (9 marks):The Bruning Company has the following budgeted income statement for the month of May 2014.Sales (40,000 units) $2,000,000Cost of goods sold:Direct materials $300,000Direct labour 400,000Variable overhead 200,000Fixed overhead 600,000 1,500,000Gross profit margin 500,000Selling & administrative costs:Sales commissions (2% of sales 40,000Delivery costs 20,000Sales salaries 120,000Administrative salaries 100,000Office rental 70,000 350,000Operating income $ 150,000The plant has a maximum capacity of 50,000 units. A company salesperson has brought an offer from a new customer to purchase the product at a price of $35.00 per unit. The customer will pick up the order at Bruning’s factory.Required:1. Analyse the consequences for the company if they accepted the new order and:a. the customer wished to purchase 8,000 units only. [3 marks]b. the customer wished to purchase 14,000 units only. [4 marks]2. What qualitative factors should the company consider in making this type of decision?[2 marks]

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