8. Montoya Enterprises produces a sword that sells for $200. Although the company's production capacity is 3,000 swords per year, only 2,500 swords are currently being produced and sold. Humperdinck Corporation has offered to purchase 500 swords as a one-time special purchase at a price of $160 per sword. If the special order is accepted, Montoya Enterprises will have to incur additional fixed costs of $2,000. At Montoya's current level of production (2,500 swords), the Montoya Enterprises incurs the following costs: Direct materials $200,000 $100,000 $ 50,000 $ 85,000 Direct labor Variable factory overhead Fixed factory overhead What will be the impact on Montoya's Enterprises' income if the special order is accepted?

8. Montoya Enterprises produces a sword that sells for $200. Although the company's production capacity is 3,000 swords per year, only 2,500 swords are currently being produced and sold. Humperdinck Corporation has offered to purchase 500 swords as a one-time special purchase at a price of $160 per sword. If the special order is accepted, Montoya Enterprises will have to incur additional fixed costs of $2,000. At Montoya's current level of production (2,500 swords), the Montoya Enterprises incurs the following costs: Direct materials $200,000 $100,000 $ 50,000 $ 85,000 Direct labor Variable factory overhead Fixed factory overhead What will be the impact on Montoya's Enterprises' income if the special order is accepted?

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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Question

8. Montoya Enterprises produces a sword that sells for $200. Although the company's production
capacity is 3,000 swords per year, only 2,500 swords are currently being produced and sold.
Humperdinck Corporation has offered to purchase 500 swords as a one-time special purchase at a
price of $160 per sword. If the special order is accepted, Montoya Enterprises will have to incur
additional fixed costs of $2,000.
At Montoya's current level of production (2,500 swords), the Montoya Enterprises incurs the
following costs:
Direct materials
$200,000
$100,000
$ 50,000
$ 85,000
Direct labor
Variable factory overhead
Fixed factory overhead
What will be the impact on Montoya's Enterprises' income if the special order is accepted?

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