ABC corp received a request for a special order of 6,000 units of product y45 fo

Question

ABC corp received a request for a special order of 6,000 units of product y45 for $13.70 each. The product cost is $11.50, dtermined as follows:

Dir Materials: 2.50
Dir Labor: 1.90
Variable Manuf Overhead: 2.30
Fixed Manuf Overhead: 4.80

Direct labor is a variable cost. The special order would have effect on the company's total fixed manufacturing overhead costs. Customer sould like modifications made to the product that would increase variable cost by $8.10 per unit and would require an investment of $20,000 in special molds that would have no salvage value.
This special order would have no effect on the comany's other sales. The company has ample spare capacity for producing the special order. if this order is accepted, the company's net operating income would increase (decrease) by?

Explanation / Answer

particulars Normal Special production order sales 6000units$13.70 82200 82200 Variable costs -40200 Normal6000*6.7 special order6000*8.10 -48600 Fixed manufacturing ov erheads normal6000*4.8 -28800 special order6000*4.8 -28800 special mould -20000 Net income/Loss 13200 -15200 if this is accepted the company net income will reduce by $15,200

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---