Herrestad Company receives an offer to make a new product, called C, for a new c

Question

Herrestad Company receives an offer to make a new product, called C, for a new customer. The customer wants to buy 1,000 units. Product C has the same cost structure as product B with three exceptions. The new customer is only willing to pay $180 per unit, direct materials costs will decrease by $15 per unit and Herrestad does not have to incur any variable selling and administrative expenses.Make a list of the expenses and amounts that are relevant for this decision. How much with the sale of this product contribute to the profitability of Herrestad?

Explanation / Answer

for product B let the per unit price = $ p let initial direct material cost = $ m let the let the fixed selling and administrative expenses are= $ x let the let the fixed selling and administrative expenses are =$y let the direct labor cost= $ l let factory overhead = $ f for product C no.of units produced=1000 per unit price of product=$ 180 direct material cost= $ (m-15) direct labor cost= $ l fixed factory overhead = $ f fixed selling and administrative expenses are =$x variable selling and administrative expenses are=$ 0 so above mention cost and expenses to be considered. profit=1000*180-1000(m-15+l+0) -(f+x) ( answer)

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---