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The following are Hibiscus Company's cost of making and selling an item Amount per unit $...

The following are Hibiscus Company's cost of making and selling an item Amount per unit $ 9 Description Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative Fixed selling and administrative A one-time-only special order has been received for 600 units. The company has the capacity to accept the order and it would not affect regular sales. The sales price for the special order is $ 26 per unit. Total fixed costs would not be affected by this order. The variable selling and administrative costs would have to be incurred for this special order. The order would require an additional $3 per unit for specialized materials and a new machine that costs $2,000. What is the financial advantage or disadvantage of accepting the special order? A $ 3,600 advantage B. $1.600 advantage . \$2,400 disadvantage 2,800 advantage

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Answer #1

Calculation of financial advantage or disadvantage of accepting the special order:

Revenue:

Sales = 15,600 [26*600]

Costs:

Variable selling and administrative costs = $5400 [9*600]

Additional cost = $1800 [3*600]

Cost of machine = $2000

Total cost: $9,200 [ 5400+ 1800+2000]

Total benefit: $15,600-$9,200 = $6,800

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