Pilgrim Corporation makes a range of products. The company\'s predetermined over
ID: 2473836 • Letter: P
Question
Pilgrim Corporation makes a range of products. The company's predetermined overhead rate is $20 per direct labor-hour, which was calculated using the following budgeted data: Variable manufacturing overhead $ 51,000 Fixed manufacturing overhead $ 289,000 Direct labor-hours 17,000 Management is considering a special order for 740 units of product N89E at $68 each. The normal selling price of product N89E is $79 and the unit product cost is determined as follows: Direct materials $ 41.00 Direct labor 14.00 Manufacturing overhead applied 20.00 Unit product cost $ 75.00 If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.
If the special order were accepted, what would be the impact on the company's overall profit?
total= profit=
Explanation / Answer
As the offer price is less than the relevant cost of the product. So the offer should not be accepted
Particulars Amount Direct Material 41 Direct Labor 14 Variable overhead (based on direct labor) 14 Total relevant cost per unit 69 Offer price 68