A company is considering a special order for 1,000 units to be priced at $8.90 (the normal pricewould be $11.50). The order would require specialized materials costing $4.00 per unit. Directlabor and variable factory overhead would cost $2.15 per unit. Fixed factory overhead is $1.20per unit. However, the company has excess capacity, and acceptance of the order would notraise total fixed factory overhead. The warehouse, however, would have to add capacity costing$1,300. Which of the following is relevant to the special order?a. $11.50b. $1.20c. $7.35d. $8.90
A company is considering a special order for 1,000 units to be priced at $8.90 (the normal pricewould be $11.50). The order would require specialized materials costing $4.00 per unit. Directlabor and variable factory overhead would cost $2.15 per unit. Fixed factory overhead is $1.20per unit. However, the company has excess capacity, and acceptance of the order would notraise total fixed factory overhead. The warehouse, however, would have to add capacity costing$1,300. Which of the following is relevant to the special order?a. $11.50b. $1.20c. $7.35d. $8.90
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A company is considering a special order for 1,000 units to be priced at $8.90 (the normal price
would be $11.50). The order would require specialized materials costing $4.00 per unit. Direct
labor and variable factory
per unit. However, the company has excess capacity, and acceptance of the order would not
raise total fixed factory overhead. The warehouse, however, would have to add capacity costing
$1,300. Which of the following is relevant to the special order?
a. $11.50
b. $1.20
c. $7.35
d. $8.90
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