Annie's Homemade's regular selling price is $5.00 per serving of ice cream. It has been approached by a wedding party who has
offered to pay $856.00 (via credit card) for 240 pre-packaged servings of ice cream. The party would expect Annie's employees to
remain at the wedding venue for two hours to serve the ice cream. From Annie's perspective, the total proceeds of $856.00, would be
sub-divided as follows:
Sales revenue =$800.00
Sales tax of gross sales) =$56.00
Annie's would cater the event with one manager, who is paid $15.00 per hour, and two additional employees who are each paid $8.00
per hour. The distance to the event is 25 miles each direction and the drive time is 60 minutes round-trip.
The company can fulfill the special order with its existing production capacity and would not have to sacrifice any other sales
opportunities. It has gathered the following additional information to assist in making the decision:
Ingredient and packaging cost per serving
Franchise fee
Credit card processing fee
Average time for manager to make one batch of 100 servings of ice cream
Average time for hourly employee to pre-package one serving of ice cream
Pickup truck diesel fuel, oil, and diesel exhaust fluid expenses
Annual expenses:
Pickup truck depreciation, insurance, registration, and vehicle tax
Manufacturing overhead (e.g., equipment depreciation, rent, utilities, insurance, etc.)
off-site sales equipment depreciation (e.g., trailer, mobile freezer and sales booth)
Required:
$1.50
5% of sales revenue
3% of total proceeds
1.5 hours
1 minute
$0.60 per mile
$15,000
$85,000
$3,000
1. For each item shown below, use the drop-down menu to categorize it as relevant or irrelevant in the decision to the accept or reject
the special-order opportunity. For each item you categorize as relevant, insert the corresponding amount of the total incremental
revenue or total incremental cost (use parentheses for all incremental costs). For each item you categorize as irrelevant, insert a
zero in the Amount column.
2. What is the financial advantage (disadvantage) of accepting this order?
Annie's Homemade's regular selling price is $5.oo per serving of ice cream.It has been approached by a wedding party who has offered to pay $856.00(via credit card) for 240 pre-packaged servings of ice cream.The party would expect Annie's employees to remain at the wedding venue for two hours to serve the ice cream.From Annie's perspective,the total proceeds of $856.0o,would be sub-divided as follows:
Sales revenue=$800.00 Sales tax (7% of gross sales) = $56.00
Annie's would cater the event with one manager,who is paid $15.00 per hour,and two additional employees who are each paid $8.00 per hour. The distance to the event is 25 miles each direction and the drive time is 60 minutes round-trip.
The company can fulfill the special order with its existing production capacity and would not have to sacrifice any other sales opportunities. It has gathered the following additional information to assist in making the decision:
Ingredient and packaging cost per serving Franchise fee Credit card processing fee Average time for manager to make one batch of 1eo servings of ice cream Average time for hourly employee to pre-package one serving of ice cream Pickup truck diesel fuel, oil, and diesel exhaust fluid expenses Annual expenses: Pickup truck depreciation, insurance, registration, and vehicle tax Manufacturing overhead (e.g., equipment depreciation, rent, utilities, insurance, etc.) Off-site sales equipment depreciation (e.g., trailer, mobile freezer and sales booth) Required:
$1.50 5% of sales revenue 3% of total proceeds 1.5 hours 1 minute $0.60 per mile
$15,000 $85,000 $3,000
1.For each item shown below,use the drop-down menu to categorize it as relevant or irrelevant in the decision to the accept or reject the special-order opportunity. For each item you categorize as relevant, insert the corresponding amount of the total incremental revenue or total incremental cost (use parentheses for all incremental costs).For each item you categorize as irrelevant, insert a zero in the Amount column
