ABC Company produces a single unit that it sells for $16 per unit. ABC has the capacity to produce 25,000 units each month. ABC is currently selling 17,000 units each month. The costs associated with each unit appears below: direct materials direct labor variable overhead sales commissions packaging distribution total variable cost allocated fixed overhead allocated fixed selling costs $2.30 $1.80 $1.10 $1.00 $0.70 $1.20 $8.10 $1.30 $0.90 ABC Company has received a special order from a customer who wants to purchase 10,000 units at a reduced price of $11 per unit. The special order customer has agreed to provide their own label and pay shipping costs. Thus, there would be no sales commissions or distribution costs associated with the special order. Calculate the increase in company profits if ABC Company accepts the special order.
ABC Company produces a single unit that it sells for $16 per unit. ABC has the capacity to produce 25,000 units each month. ABC is currently selling 17,000 units each month. The costs associated with each unit appears below: direct materials direct labor variable overhead sales commissions packaging distribution total variable cost allocated fixed overhead allocated fixed selling costs $2.30 $1.80 $1.10 $1.00 $0.70 $1.20 $8.10 $1.30 $0.90 ABC Company has received a special order from a customer who wants to purchase 10,000 units at a reduced price of $11 per unit. The special order customer has agreed to provide their own label and pay shipping costs. Thus, there would be no sales commissions or distribution costs associated with the special order. Calculate the increase in company profits if ABC Company accepts the special order.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:ABC Company produces a single unit that it sells
for $16 per unit. ABC has the capacity to produce
25,000 units each month. ABC is currently selling
17,000 units each month. The costs associated with
each unit appears below:
direct materials
direct labor
variable overhead
sales commissions
packaging
distribution
total variable cost
allocated fixed overhead
allocated fixed selling costs
$2.30
$1.80
$1.10
$1.00
$0.70
$1.20
$8.10
$1.30
$0.90
ABC Company has received a special order from a
customer who wants to purchase 10,000 units at
a reduced price of $11 per unit. The special order
customer has agreed to provide their own label and
pay shipping costs. Thus, there would be no sales
commissions or distribution costs associated with
the special order.
Calculate the increase in company profits if ABC
Company accepts the special order.
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