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Question: problem 1 mystic incorporated sells capiz shell wind chimes for...

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Problem 1: Mystic Incorporated sells capiz shell wind chimes for $32.50 each. At their current
capacity, they can produce 65,000 wind chimes per year. The costs of producing and selling
65,000 wind chimes are as follows:
Cost per Total
Chime Costs
Direct Materials $11.70 $760,500.00
Direct Mfg. Labor 2.93 190,450.00
VMOH 0.98 63,700.00
FMOH 4.88 317,200.00
VC-Marketing 1.95 126,750.00
FC-Marketing 3.90 253,500.00
     Total Cost $26.34 $1,712,100.00
Requirement 1: Mystic is currently producing and selling 39,000 wind chimes; its fixed costs are
the same as given in the data above. Whimsey Corporation wants to place a one-time special
order for 26,000 wind chimes at a sales price of $24.38 each. Mystic will incur no variable sales
costs for this special order. Should it accept? Show your work to justify your answer!
Requirement 2: Suppose that Mystic is currently producing and selling 65,000 wind chimes. If it
accept's Whimsey's offer, it will have to sell 26,000 fewer wind chimes to its regular customers.
(a) On financial considerations alone, should Mystic accept this one-time special offer? Show
your work to justify your answer.
(b) On financial considerations alone, at what price would Mystic be indifferent between
accepting the special order and continuing to sell chimes to its regular customers at $31.20 each?
(c) What other factors should Mystic consider in deciding whether or not to accept the one-time
special offer?
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