Pardo Company produces a single product and has capacity to produce 105,000 units per month. Costs to produce its current monthly sales of 84,000 units follow. The normal selling price of the product is $134 per unit. A new customer offers to purchase 21,000 units for $63.00 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales. Costs at 84,000 Units Per Unit $ 12.50 $ 1,050,000 1,260,000 1,008,000 1,470,000 1,092,000 $ 5,880,000 Direct materials Direct labor 15.00 Variable overhead 12.00 Fixed overhead 17.50 13.00 $ 70.00 Fixed general and administrative Totals (a) Compute the income from the special offer. (b) Should the company accept the special offer?
Pardo Company produces a single product and has capacity to produce 105,000 units per month. Costs to produce its current monthly sales of 84,000 units follow. The normal selling price of the product is $134 per unit. A new customer offers to purchase 21,000 units for $63.00 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales. Costs at 84,000 Units Per Unit $ 12.50 $ 1,050,000 1,260,000 1,008,000 1,470,000 1,092,000 $ 5,880,000 Direct materials Direct labor 15.00 Variable overhead 12.00 Fixed overhead 17.50 13.00 $ 70.00 Fixed general and administrative Totals (a) Compute the income from the special offer. (b) Should the company accept the special offer?
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 7PB: Remarkable Enterprises requires four units of part A for every unit of Al that it produces....
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