keystone resorts ltd has approached crystal printers inc with a special order to pro 544834

Special Order Decision

P 7. Keystone Resorts, Ltd., has approached Crystal Printers, Inc., with a special order to produce 300,000 two-page brochures. Most of Crystal’s work consists of recurring short-run orders. Keystone Resorts is offering a one-time order, and Crystal has the capacity to handle the order over a two-month period. The management of Keystone Resorts has stated that the company would be unwilling to pay more than $48 per 1,000 brochures. Crystal Printers’ controller assembled the following cost data for this decision analysis: Direct materials (paper) would be $26.80 per 1,000 brochures; direct labor costs would be $6.80 per 1,000 brochures; direct materials (ink) would be $4.40 per 1,000 brochures; variable production overhead would be $6.20 per 1,000 brochures; machine maintenance (fixed cost) is $1.00 per direct labor dollar. Other fixed production overhead amounts to $2.40 per direct labor dollar. Variable packing costs would be $4.30 per 1,000 brochures. Also, the share of general and administrative expenses (fixed costs) to be allocated would be $5.25 per direct labor dollar.

Required

1. Prepare an analysis for Crystal Printers’ management to use in deciding whether to accept or reject Keystone Resorts’ offer. What decision should be made?

2. What is the lowest possible price Crystal Printers can charge per thousand and still make a $6,000 profit on the order?