Mohave Corp. makes several varieties of beach umbrellas and
accessories. It has been approached by a company called Lost Mine
Industries about producing a special order for a custom umbrella
called the Ultimate Shade (US). The special-order umbrellas with
the Lost Mine Company logo would be distributed to participants at
an upcoming convention sponsored by Lost Mine.

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Question: Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached b…
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Lost Mine has offered to buy 2,900 of the US umbrellas at a
price of $27 each. Mohave currently has the excess capacity
necessary to accept the offer. The following information is related
to the production of the US umbrella:   

Direct materials $12

Direct labor $6

Variable manufacturing overhead $8

Fixed manufacturing overhead $2.50

Total cost $28.50

Regular sales price $35

Compute the incremental profit (or loss) from accepting the
special order.

Suppose that the special order had been to purchase 3,400
umbrellas for $25.00 each. Recompute the incremental profit (or
loss) from accepting the special order under this scenario.

Assume that Mohave is operating at full capacity. Calculate the
special-order price per unit at which Mohave would be indifferent
between accepting or rejecting the special order.

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