1.) A company receives a special order for 200 units that requires stamping the buyer's name on each unit, yielding an additional fixed cost of $400 to its normal costs. Without the order, the company is operating at 75% of capacity and produces 7,500 units of product at the costs below. The company's normal selling price is $22 per unit. The sales price for the special order is $18 per unit. Costs (7,500 Units) Variable costs Fixed costs per unit Direct materials $37,500 $5.00 Direct labor 60,000 $8.00 Overhead (30% variable) 20,000 $0.80 $14,000 Selling expenses |(60% variable) 25,000 $2.00 $10,000 The special order will not affect normal unit sales and will not increase fixed overhead and selling expenses. Variable selling expenses on the special order are reduced to one-half the normal amount. Should the company accept the special order?

1.) A company receives a special order for 200 units that requires stamping the buyer's name on each unit, yielding an additional fixed cost of $400 to its normal costs. Without the order, the company is operating at 75% of capacity and produces 7,500 units of product at the costs below. The company's normal selling price is $22 per unit. The sales price for the special order is $18 per unit. Costs (7,500 Units) Variable costs Fixed costs per unit Direct materials $37,500 $5.00 Direct labor 60,000 $8.00 Overhead (30% variable) 20,000 $0.80 $14,000 Selling expenses |(60% variable) 25,000 $2.00 $10,000 The special order will not affect normal unit sales and will not increase fixed overhead and selling expenses. Variable selling expenses on the special order are reduced to one-half the normal amount. Should the company accept the special order?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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