Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 98,400 units per year is: Direct materials $ 1.90 Direct labor $ 4.00 Variable manufacturing overhead $ 0.70 Fixed manufacturing overhead $ 4.35 Variable selling and administrative expenses $ 1.90 Fixed selling and administrative expenses $ 3.00 The normal selling price is $22.00 per unit. The company’s capacity is 121,200 units per year. An order has been received from a mail-order house for 1,900 units at a special price of $19.00 per unit. This order would not affect regular sales or the company’s total fixed costs. Required: 1. What is the financial advantage (disadvantage) of accepting the special order? 2. As a separate matter from the special order, assume the company’s inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for these units? Required 1 :
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 98,400 units per year is: Direct materials $ 1.90 Direct labor $ 4.00 Variable manufacturing overhead $ 0.70 Fixed manufacturing overhead $ 4.35 Variable selling and administrative expenses $ 1.90 Fixed selling and administrative expenses $ 3.00 The normal selling price is $22.00 per unit. The company’s capacity is 121,200 units per year. An order has been received from a mail-order house for 1,900 units at a special price of $19.00 per unit. This order would not affect regular sales or the company’s total fixed costs. Required: 1. What is the financial advantage (disadvantage) of accepting the special order? 2. As a separate matter from the special order, assume the company’s inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for these units? Required 1 :
Chapter5: Process Costing
Section: Chapter Questions
Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...
Related questions
Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 98,400 units per year is:
Direct materials $ 1.90
Direct labor $ 4.00
Variable manufacturing overhead $ 0.70
Fixed manufacturing overhead $ 4.35
Variable selling and administrative expenses $ 1.90
Fixed selling and administrative expenses $ 3.00
The normal selling price is $22.00 per unit. The company’s capacity is 121,200 units per year. An order has been received from a mail-order house for 1,900 units at a special price of $19.00 per unit. This order would not affect regular sales or the company’s total fixed costs.
Required:
1. What is the financial advantage (disadvantage) of accepting the special order?
2. As a separate matter from the special order, assume the company’s inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for these units?
Required 1 :
Transcribed Image Text:Delta Company produces a single product. The cost of producing and selling a single unit
of this product at the company's normal activity level of 98,400 units per year is:
$ 1.90
$ 4.00
$ 0.70
$ 4.35
$1.90
$ 3.00
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling and administrative expenses
Fixed selling and administrative expenses
The normal selling price is $22.00 per unit. The company's capacity is 121,200 units per
year. An order has been received from a mail-order house for 1,900 units at a special
price of $19.00 per unit. This order would not affect regular sales or the company's total
fixed costs.
Required:
1. What is the financial advantage (disadvantage) of accepting the special order?
2. As a separate matter from the special order, assume the company's inventory includes
1,000 units of this product that were produced last year and that are inferior to the current
model. The units must be sold through regular channels at reduced prices. The company
does not expect the selling of these inferior units to have any effect on the sales of its
current model. What unit cost is relevant for establishing a minimum selling price for
these units?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
What is the financial advantage (disadvantage) of accepting the special order?
< Required 1
Required 2
>
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub