JART manufactures and sells underwater markers. Its contribution margin income statement follows Contribution Margin Income Statement For Year Ended December 31 Sales (590,000 units) Variable costs Direct materials Direct labor Varlable overhead Contribution margin Fixed costs Fixed overhead Per Unit $ 6.00 Annual Total $ 3,540,000 1.63 0.47 0.50 961,700 277,300 295,000 2,006,000 3.40 0.20 118,000 Fixed general and administrative 0.15 88,500 Income $ 3.05 $ 1,799,500 A potential customer offers to buy 69,000 units for $3.00 each. These sales would not affect the company's sales through its normal channels. Detals about the special offer follow. • Direct materials cost per unit and variable overhead cost per unit would not change • Direct labor cost per unit would be $0.50 because the offer would require overtime pay Accepting the offer would require incremental fixed general and administrative costs of $6,900. Accepting the offer would require no incremental fixed overhead costs. Required: 1. Compute income from the special offer. 2. Should the company accept or reject the special offer?

JART manufactures and sells underwater markers. Its contribution margin income statement follows Contribution Margin Income Statement For Year Ended December 31 Sales (590,000 units) Variable costs Direct materials Direct labor Varlable overhead Contribution margin Fixed costs Fixed overhead Per Unit $ 6.00 Annual Total $ 3,540,000 1.63 0.47 0.50 961,700 277,300 295,000 2,006,000 3.40 0.20 118,000 Fixed general and administrative 0.15 88,500 Income $ 3.05 $ 1,799,500 A potential customer offers to buy 69,000 units for $3.00 each. These sales would not affect the company's sales through its normal channels. Detals about the special offer follow. • Direct materials cost per unit and variable overhead cost per unit would not change • Direct labor cost per unit would be $0.50 because the offer would require overtime pay Accepting the offer would require incremental fixed general and administrative costs of $6,900. Accepting the offer would require no incremental fixed overhead costs. Required: 1. Compute income from the special offer. 2. Should the company accept or reject the special offer?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 21E: Ellerson Company provided the following information for the last calendar year: During the year,...

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