The Molis Company has the capacity to produce 15,000 haks each month. Current regular production and sales are 10,000 haks per month at a selling price of P15 each. Based on this level of activity, the following unit costs are incurred: Direct materials P5.00 Direct labor 3.00 Variable manufacturing overhead 0.75 Fixed manufacturing overhead 1.50 Variable selling expense 0.25 Fixed administrative expense 1.00 The fixed costs, both manufacturing and administrative, are constant in total within the relevant range of 10,000 to 15,000 haks per month. The Molis Company has received a special order from a customer who wants to pay a reduced price of P10 per hak. There would be no selling expense in connection with this special order. And, this order would have no effect on the company's other sales. 1. Suppose the special order is for 4,000 haks this month. If this offer is accepted by Molis, the company's operating income for the month will: 2. Suppose the special order is for 6,000 haks this month and thus some regular sales would have to be given up. If this offer is accepted by Molis, the company's operating income for the month will:
The Molis Company has the capacity to produce 15,000 haks each month. Current regular production and sales are 10,000 haks per month at a selling price of P15 each. Based on this level of activity, the following unit costs are incurred:
|
|
Direct materials |
P5.00 |
|
|
Direct labor |
3.00 |
|
|
Variable manufacturing overhead |
0.75 |
|
|
Fixed manufacturing overhead |
1.50 |
|
|
Variable selling expense |
0.25 |
|
|
Fixed administrative expense |
1.00 |
The fixed costs, both manufacturing and administrative, are constant in total within the relevant range of 10,000 to 15,000 haks per month.
The Molis Company has received a special order from a customer who wants to pay a reduced price of P10 per hak. There would be no selling expense in connection with this special order. And, this order would have no effect on the company's other sales.
1. Suppose the special order is for 4,000 haks this month. If this offer is accepted by Molis, the company's operating income for the month will:
2. Suppose the special order is for 6,000 haks this month and thus some regular sales would have to be given up. If this offer is accepted by Molis, the company's operating income for the month will:
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
