ACCEPT or REJECT (SPECIAL ORDER DECISION) XYZ Company produces and sells toy cars. Each toy car sells for P50 and the company sells approximately 500,000 toy cars each year. Unit cost data for 2022 are given below: Fixed Variable Direct Material - P15 Direct Labor - P12 Factory Overhead P8 P5 Overhead Costs P2 P3 XYZ has received an offer from a foreign customer to purchase 15,000 toy cars at P40. Domestic sales will not be affected by this transaction. If the offer is accepted, the company has idle capacity to accommodate the order but the unit variable distribution costs will increase by P2 for insurance and import duties. REQUIREMENTS: 1. What is the relevant unit cost of the special order? 2. Should Brenda accept or reject the special order?
ACCEPT or REJECT (SPECIAL ORDER DECISION)
XYZ Company produces and sells toy cars. Each toy car sells for P50 and the company sells approximately 500,000 toy cars each year. Unit cost data for 2022 are given below:
Fixed Variable
Direct Material - P15
Direct Labor - P12
Factory
Overhead Costs P2 P3
XYZ has received an offer from a foreign customer to purchase 15,000 toy cars at P40. Domestic sales will not be affected by this transaction. If the offer is accepted, the company has idle capacity to accommodate the order but the unit variable distribution costs will increase by P2 for insurance and
import duties.
REQUIREMENTS:
1. What is the relevant unit cost of the special order?
2. Should Brenda accept or reject the special order?
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