Question

List Price $22.00 Direct Materials $             5.35 Direct Labor 5.50 Variable Manufacturing Costs 3.25 Fixed Manufacturing...

List Price $22.00
Direct Materials $             5.35
Direct Labor 5.50
Variable Manufacturing Costs 3.25
Fixed Manufacturing Costs 2.05
Variable selling, general & administrative costs 1.45
Fixed selling, general & administrative costs 1.75
Total costs per unit $           19.35
Special Order price 15.00
Special order volume 20,000

Carly Company produces and sells a consumer goods product. The list price for this product is $22.00 per unit. The product’s per unit costs are provided at left. A potential customer has approached Carly with an offer to purchase 20,000 units of Carly’s primary product at a price of $15.00 per unit. Carly has excess production capacity and could easily fill this order.

What effect would accepting this order have on Carly’s pretax profit? Show your work.

Homework Answers

Answer #1
Since Company has excess capacity to fulfill the order the relevant cost for the order is Variable Cost to be incurred:
Variable Cost to be Incurred:
Direct Material 5.35
Direct Labor 5.50
Variable MOH 3.25
Variable S&A Cost 1.45
Total Relevant Cost 15.55
Special Order Price 15.00
Loss PU -0.55
Special Order Volume 20000
Loss on Accepting the Order -11000 (Pretax Value)
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Following are unit costs- Direct Materials: $7.00 Direct Labor: $5.30 Variable Manufacturing overhead: $1.50 Fixed Manufacturing...
Following are unit costs- Direct Materials: $7.00 Direct Labor: $5.30 Variable Manufacturing overhead: $1.50 Fixed Manufacturing Overhead: $5.90 Variable Selling Expenses: $2.10 Fixed Selling Expenses: $3.40 Normal Selling price is $30 per unit. A Special order of $20 per unit is received for 10,000 unites It would not affect normal sales. Required: Should the order be accepted? Show Calculations
1- Costs for direct materials, direct labor and manufacturing overhead are assigned to each job. True...
1- Costs for direct materials, direct labor and manufacturing overhead are assigned to each job. True or false 2- J&A Corporation has a monthly target operating income of $35,000. Variable expenses are 30% of sales and monthly fixed expenses are $7,000. What is the monthly margin of safety in dollars if the business achieves its operating income goal? A) $60,000 B) $70,000 C) $50,000 D) $21,000 3- At Dwight Incorporated, total fixed and variable costs are $430,000 at a production...
Tunnel Incorporated provided the following information regarding its single product: Direct materials used $220,000 Direct labor...
Tunnel Incorporated provided the following information regarding its single product: Direct materials used $220,000 Direct labor incurred $470,000 Variable manufacturing overhead $150,000 Fixed manufacturing overhead $100,000 Variable selling and administrative expenses $55,000 Fixed selling and administrative expenses $20,000 The regular selling price for the product is $80. The annual quantity of units produced and sold is 44,000 units (the costs above relate to the 44,000 units production level). The company has excess capacity and regular sales will not be affected...
Nina Company has provided the following information: Direct material $20.00 Direct labor $17.00 Variable manufacturing overhead...
Nina Company has provided the following information: Direct material $20.00 Direct labor $17.00 Variable manufacturing overhead $15.00 Fixed manufacturing overhead $10.00 Variable administrative expense $5.00 Fixed administrative expense $2.00 Nina normally produces 8,000 units and sells these units at $100 per unit. A national discount box store has contacted the company about ordering 1,000 units that would be manufactured in a slightly different way and would save the company $3.00 per unit in direct materials. Nina has excess capacity and...
Selling price per unit (package of 2 CDs)...................................... $27.00 Variable costs per unit: Direct material............................................................................................................... $5.50...
Selling price per unit (package of 2 CDs)...................................... $27.00 Variable costs per unit: Direct material............................................................................................................... $5.50 Direct labor...................................................................................................................... $6.00 Artist's royalties.............................................................................................................. $5.00 Manufacturing overhead.......................................................................................... $3.50 Selling expenses............................................................................................................ $2.50 Total variable costs per unit............................................................ $22.50 Annual fixed costs: Manufacturing overhead.......................................................................................... $192,000 Selling and administrative....................................................................................... $276,000 Total fixed costs................................................................................ $468,000 Forecasted annual sales volume (120,000 units)......................... $3,240,000 Management estimates that direct-labor costs will increase by 8% next year. How many units will the company have to sell next year to reach its...
Burns Company incurred the following costs during the year: direct materials $23.50 per unit; direct labor...
Burns Company incurred the following costs during the year: direct materials $23.50 per unit; direct labor $15.30 per unit; variable manufacturing overhead $17.50 per unit; variable selling and administrative costs $9.60 per unit; fixed manufacturing overhead $126,000; and fixed selling and administrative costs $11,000. Burns produced 6,300 units and sold 6000 units. Determine the manufacturing cost per unit under (a) absorption costing and (b) variable costing. (Round answers to 2 decimal places, e.g. 52.75.)
EMP cost in the manufacturing of $270,000 units are as follows: Variable Costs Direct Labor $2,100,000...
EMP cost in the manufacturing of $270,000 units are as follows: Variable Costs Direct Labor $2,100,000 Direct Materials $1,800,000 Variable Selling Expenses $600,000 Variable Overhead $900,000 Fixed Costs Administrative Expenses $900,000 Fixed Overhead $860,000 EMP Target Profit is $400,000 Determine variable cost per unit
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of...
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 47,000 units per month is as follows: Per Unit Direct materials $ 46.10 Direct labor $ 8.80 Variable manufacturing overhead $ 1.80 Fixed manufacturing overhead $ 18.70 Variable selling & administrative expense $ 3.20 Fixed selling & administrative expense $ 15.00 The normal selling price of the product is $100.10 per unit. An order has...
Direct Materials          $10 per unit Direct Labor                $20 per unit Variable OH costs    $10 per unit...
Direct Materials          $10 per unit Direct Labor                $20 per unit Variable OH costs    $10 per unit Fixed OH costs         $240,000 per year      In addition to the information provided above the Company also had:               Variable selling and administrative expenses    $4 per unit                Fixed selling and administrative expenses     $120,000 per year      Prepare and Income Statement for Vijay Company using the traditional absorption costing method and an income statement using the variable costing method assuming they sold 30,000...
Martin Incorporated provided the following information regarding its only​ product: Sale price per unit ​$50.00 Direct...
Martin Incorporated provided the following information regarding its only​ product: Sale price per unit ​$50.00 Direct materials used $161,000 Direct labor incurred $190,000 Variable manufacturing overhead $123,000 Variable selling and administrative expenses $70,000 Fixed manufacturing overhead ​$65,000 Fixed selling and administrative expenses ​$12,000 Units produced and sold 20,000 Assume no beginning inventory Assuming there is excess​ capacity, what would be the effect on operating income of accepting a special order for 1,300 units at a sale price of $ 49...