Question 1 Adamyan Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 15,000 medals each month; current monthly production is 12,750 medals. The company normally charges $120 per medal. Cost data for the current level of production are shown below: Number of units 15,000 Variable costs: Direct materials $624,750 Direct labor $306,000 Selling and administrative $15,300 Fixed costs: Manufacturing $506,175 Selling and administrative $123,675 The company has just received a special one-time order for 700 medals at $83 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Required: Compute the variable cost per unit for the normal level production. (3 marks) Compute relevant costs for the special order. For each cost listed above, state the reason for the cost treated as relevant cost or irrelevant cost. (5 marks) c. Should the company accept this special order? State the reason. (2 marks)

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter13: Lean Manufacturing And Activity Analysis

Section: Chapter Questions

Problem 3BE

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Question 1

Adamyan Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 15,000 medals each month; current monthly production is 12,750 medals. The company normally charges $120 per medal. Cost data for the current level of production are shown below:

Number of units	15,000
Variable costs:
Direct materials	$624,750
Direct labor	$306,000
Selling and administrative	$15,300
Fixed costs:
Manufacturing	$506,175
Selling and administrative	$123,675

The company has just received a special one-time order for 700 medals at $83 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.

Required:

Compute the variable cost per unit for the normal level production. (3 marks)
Compute relevant costs for the special order. For each cost listed above, state the reason for the cost treated as relevant cost or irrelevant cost. (5 marks) c. Should the company accept this special order? State the reason. (2 marks)

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