Question

Delta Company produces a single product. The cost of producing and selling a single unit of...

Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 103,200 units per year is:

Direct materials $ 1.70
Direct labor $ 4.00
Variable manufacturing overhead $ 0.80
Fixed manufacturing overhead $ 3.45
Variable selling and administrative expenses $ 1.70
Fixed selling and administrative expenses $ 3.00

The normal selling price is $20.00 per unit. The company’s capacity is 115,200 units per year. An order has been received from a mail-order house for 1,000 units at a special price of $17.00 per unit. This order would not affect regular sales or the company’s total fixed costs.

Required:

1. What is the financial advantage (disadvantage) of accepting the special order?

2. As a separate matter from the special order, assume the company’s inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units?

Homework Answers

Answer #1
1
Per unit Total 1000 units
Incremental revenue 17.00 17000
Incremental costs:
Direct materials 1.70 1700
Direct labor 4.00 4000
Variable manufacturing overhead 0.80 800
Variable selling and administrative costs 1.70 1700
Total Incremental costs 8200
Incremental net operating income(loss) 8800
Financial advantage $8800
2
Relevant cost per unit = Variable selling and administrative costs =$1.70
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
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 88,800 units per year is: Direct materials $ 1.90 Direct labor $ 4.00 Variable manufacturing overhead $ 0.80 Fixed manufacturing overhead $ 3.45 Variable selling and administrative expenses $ 1.90 Fixed selling and administrative expenses $ 3.00 The normal selling price is $20.00 per unit. The company’s capacity is 121,200 units per year. An order...
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 103,200 units per year is: Direct materials $ 2.10 Direct labor $ 3.00 Variable manufacturing overhead $ 0.70 Fixed manufacturing overhead $ 4.05 Variable selling and administrative expenses $ 1.90 Fixed selling and administrative expenses $ 2.00 The normal selling price is $19.00 per unit. The company’s capacity is 134,400 units per year. An order...
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 85,200 units per year is: Direct materials $ 1.80 Direct labor $ 2.00 Variable manufacturing overhead $ 0.90 Fixed manufacturing overhead $ 5.05 Variable selling and administrative expenses $ 1.70 Fixed selling and administrative expenses $ 1.00 The normal selling price is $24.00 per unit. The company’s capacity is 102,000 units per year. An order...
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 87,600 units per year is:   Direct materials $ 2.20   Direct labor $ 2.00   Variable manufacturing overhead $ .70   Fixed manufacturing overhead $ 4.25   Variable selling and administrative expenses $ 1.10   Fixed selling and administrative expenses $ 1.00 The normal selling price is $20 per unit. The company’s capacity is 115,200 units per year. An order...
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 103,200 units per year is: Direct materials $ 2.40 Direct labor $ 3.00 Variable manufacturing overhead $ 0.90 Fixed manufacturing overhead $ 3.55 Variable selling and administrative expenses $ 1.90 Fixed selling and administrative expenses $ 2.00 The normal selling price is $26.00 per unit. The company’s capacity is 126,000 units per year. An order...
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 103,200 units per year is: Direct materials $ 2.30 Direct labor $ 3.00 Variable manufacturing overhead $ 0.80 Fixed manufacturing overhead $ 5.15 Variable selling and administrative expenses $ 1.90 Fixed selling and administrative expenses $ 2.00 The normal selling price is $21.00 per unit. The company’s capacity is 130,800 units per year. An order...
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 86,400 units per year is: Direct materials $ 1.60 Direct labor $ 2.00 Variable manufacturing overhead $ 0.60 Fixed manufacturing overhead $ 3.85 Variable selling and administrative expenses $ 1.80 Fixed selling and administrative expenses $ 1.00 The normal selling price is $20.00 per unit. The company’s capacity is 118,800 units per year. An order...
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 98,400 units per year is: Direct materials $ 1.70 Direct labor $ 3.00 Variable manufacturing overhead $ 0.80 Fixed manufacturing overhead $ 4.15 Variable selling and administrative expenses $ 1.30 Fixed selling and administrative expenses $ 2.00 The normal selling price is $19.00 per unit. The company’s capacity is 129,600 units per year. An order...
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 96,000 units per year is: Direct materials $ 1.90 Direct labor $ 3.00 Variable manufacturing overhead $ 0.50 Fixed manufacturing overhead $ 4.95 Variable selling and administrative expenses $ 1.70 Fixed selling and administrative expenses $ 2.00 The normal selling price is $19.00 per unit. The company’s capacity is 127,200 units per year. An order...
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 85,200 units per year is: Direct materials $ 1.60 Direct labor $ 4.00 Variable manufacturing overhead $ 0.90 Fixed manufacturing overhead $ 4.95 Variable selling and administrative expenses $ 1.70 Fixed selling and administrative expenses $ 3.00 The normal selling price is $21.00 per unit. The company’s capacity is 106,800 units per year. An order...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT