Fineprint Company (Abridged)

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Submitted By trotsky
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Fineprint Company (Abridged)
Net income is calculated to determine whether to accept the special order from Abbie Jenkins. Looking at the normal operation, net income for selling 150,000 brochures is $3,000. Due to FinePrint operating capacity capped at 150,000 per month, FinePrint have to give out equivalent amount of business (25,000 brochures) to produce for Abbie Jenkins. FinePrint net income will drop 50% from $3,000 to $1,500 if John accept Abbie Jenkins offer.
Hence, FinePrint should turn down the offer.
Standard order
Selling price = $17.00 per 100 brochures $0.17 per brochure
Selling units = 150,000 Total Per Unit
Revenue $25,500.00 $0.17
Less : Variable expenses $10,500.00 $0.07
Contribution margin $15,000.00 $0.10
Less: fixed expenses $12,000.00
Net income $3,000.00 Special & standard order mix Special order - 25,000 brochures
Selling price $10.00 per 100 brochures $0.10 per brochure
Selling units 25,000
Variable expenses per unit $0.06 (Less $1 for per 100 brochures for SR) Total Per Unit
Revenue $2,500.00 $0.10
Less : Variable expenses $1,500.00 $0.06
Contribution margin $1,000.00 $0.04

Fineprint Company (Abridged)
Q1a con’t

Standard order - 125,000 brochures
Selling price = $17.00 per 100 brochures $0.17 per brochure
Selling units = 125,000 Total Per Unit
Revenue $21,250.00 $0.17
Less : Variable expenses $8,750.00 $0.07
Contribution margin $12,500.00 $0.10 Total contribution margin $13,500.00
Less: fixed expenses $12,000.00
Net income $1,500.00

Fineprint Company (Abridged)
In this case, FinePrint should accept which would increase net income from $3,000 to $ 4,000.
Standard order
Selling price = $17.00 per…...

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