Question

Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce. Gwinnett has the capacity to manufacture and sell 18,000 cases of sauce each year but is currently only manufacturing and selling 16,600. The following costs relate to annual operations at 16,600 cases:

	Total Cost
Variable manufacturing cost	$365,200
Fixed manufacturing cost	$62,000
Variable selling and administrative cost	$83,000
Fixed selling and administrative cost	$44,000

Gwinnett normally sells its sauce for $50 per case. A local school district is interested in purchasing Gwinnett's excess capacity of 1,400 cases of sauce but only if they can get the sauce for $25 per case. This special order would not affect regular sales or total fixed costs or variable costs per unit. If this special order is accepted, Gwinnett's profits for the year will:

increase by $140

decrease by $26,200

decrease by $33,200

decrease by $2,800

-

Gilder Corporation makes a product with the following standard costs:

   

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost Per Unit
Direct materials	5.3 grams	$7.00 per gram	$37.10
Direct labor	1.6 hours	$18.00 per hour	$28.80
Variable overhead	1.6 hours	$7.00 per hour	$11.20

The company reported the following results concerning this product in June.

    

Originally budgeted output	5,700	units
Actual output	5,600	units
Raw materials used in production	28,470	grams
Purchases of raw materials	32,700	grams
Actual direct labor-hours	5,400	hours
Actual cost of raw materials purchases	$232,170
Actual direct labor cost	$102,060
Actual variable overhead cost	$36,180

    

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

    

The materials quantity variance for June is:

$8,591 F

$8,470 U

$8,591 U

$8,470 F

Answer 1

Solution

Fixed Cost will remain unchanged due to utilization of remaining capacity of 1400 cases.

Total variable cost per unit = Total variable cost / number of cases

= 365,200 +83,000 / 16,600

= $27 per unit

If new order is accepted Gwinnett will suffer loss of $2 (New offer price of $ 25 - variable cost of $27 per case) per case.

Total loss to Gwinnett due to acceptance of order = Number of cases * loss per case

= 1400 * 2

= $2,800

If this special order is accepted Gwinnet’s profit for the year will decrease by $2,800.

I am one part is solve