A company receives a special order for 200 units that requires stamping the buyer’s name on each unit, yielding an additional fixed cost of $400. Without the order, the company operates at 75% of capacity and produces 7,500 units of product at the costs below. The company’s normal selling price is $22 per unit. Direct materials $37,500 Direct labor 60,000 Overhead (30% variable) . 20,000 Selling expenses (60% variable) . 25,000 The requested sales price for the special order is $18 per unit. The special order will not affect normal unit sales and will not increase fixed overhead or fixed selling expenses. Variable selling expenses on the special order are reduced to one-half the normal amount. Should the company accept the special order?
A company receives a special order for 200 units that requires stamping the buyer’s name on each unit, yielding an additional fixed cost of $400. Without the order, the company operates at 75% of capacity and produces 7,500 units of product at the costs below. The company’s normal selling price is $22 per unit. Direct materials $37,500 Direct labor 60,000 Overhead (30% variable) . 20,000 Selling expenses (60% variable) . 25,000 The requested sales price for the special order is $18 per unit. The special order will not affect normal unit sales and will not increase fixed overhead or fixed selling expenses. Variable selling expenses on the special order are reduced to one-half the normal amount. Should the company accept the special order?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter17: Activity Resource Usage Model And Tactical Decision Making
Section: Chapter Questions
Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...
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A company receives a special order for 200 units that requires stamping the buyer’s name on each unit,
yielding an additional fixed cost of $400. Without the order, the company operates at 75% of capacity and
produces 7,500 units of product at the costs below. The company’s normal selling price is $22 per unit. Direct materials $37,500
Direct labor 60,000
Overhead (30% variable) . 20,000
Selling expenses (60% variable) . 25,000 The requested sales price for the special order is $18 per unit. The special order will not affect normal unit
sales and will not increase fixed overhead or fixed selling expenses. Variable selling expenses on the special
order are reduced to one-half the normal amount. Should the company accept the special order?
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