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600 units x $10) S 6,000 Direct labor (600 units x $16) 9,600 Variable otal $33,000 Average cost per unit $55 Selling and administrative expe 55 each. The order will not affect the selling price to regular customers decision to accept or reject the special order, assuming Regal has exce

600 units x $10) S 6,000 Direct labor (600 units x $16) 9,600 Variable otal $33,000 Average cost per unit $55 Selling and administrative expe 55 each. The order will not affect the selling price to regular customers decision to accept or reject the special order, assuming Regal has exce

FINANCIAL ACCOUNTING
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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Alpine produces a single product. The company's March 2018 income statement is as follows: Sales (600 x $60) $36,000 Cost of goods sold - 33,000 Gross profit $ 3,000 Selling and administrative 2, 000 Net income $ 1,000 There were no beginning or ending inventories of work - in - process or finished goods. Alpine's full manufacturing costs were as follows: Direct materials (600 units x $10) $ 6,000 Direct labor (600 units x $16) 9,600 Variable manufacturing overhead (600 units x $9) 5,400 Fixed manufacturing overhead 12,000 Total $33,000 Average cost per unit $55 Selling and administrative expenses are all fixed. Alpine just received a special order from a firm in Canada to purchase 450 units at $55 each. The order will not affect the selling price to regular customers. Required: a. Prepare a differential analysis of the relevant costs and revenues associated with the decision to accept or reject the special order, assuming Regal has excess capacity. b. Determine the net advantage or disadvantage (profit increase or decrease) of accepting the order, assuming Regal does not have excess capacity.
Transcribed Image Text:Alpine produces a single product. The company's March 2018 income statement is as follows: Sales (600 x $60) $36,000 Cost of goods sold - 33,000 Gross profit $ 3,000 Selling and administrative 2, 000 Net income $ 1,000 There were no beginning or ending inventories of work - in - process or finished goods. Alpine's full manufacturing costs were as follows: Direct materials (600 units x $10) $ 6,000 Direct labor (600 units x $16) 9,600 Variable manufacturing overhead (600 units x $9) 5,400 Fixed manufacturing overhead 12,000 Total $33,000 Average cost per unit $55 Selling and administrative expenses are all fixed. Alpine just received a special order from a firm in Canada to purchase 450 units at $55 each. The order will not affect the selling price to regular customers. Required: a. Prepare a differential analysis of the relevant costs and revenues associated with the decision to accept or reject the special order, assuming Regal has excess capacity. b. Determine the net advantage or disadvantage (profit increase or decrease) of accepting the order, assuming Regal does not have excess capacity.
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