Mcniff Corporation makes a range of products. The company\'s predetermined overh
ID: 2522337 • Letter: M
Question
Mcniff Corporation makes a range of products. The company's predetermined overhead rate is $18 per direct labor-hour, which was calculated using the following budgeted data:
Management is considering a special order for 720 units of product O96S at $66 each. The normal selling price of product O96S is $77 and the unit product cost is determined as follows:
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.
Required:
The financial advantage (disadvantage) for the company as a result of accepting this special order would be:
Variable manufacturing overhead $ 75,000 Fixed manufacturing overhead $ 195,000 Direct labor-hours 15,000Explanation / Answer
Per unit Total 720 units Incremental revenue 66 47520 Incremental costs: Variable costs: Direct materials 39 28080 Direct labor 16 11520 Variable manufacturing overhead 5 3600 Total Incremental costs 43200 Incremental net operating income(loss) 4320 Fnancial advantage $4320