Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normalactivity level of 94,800 units per year is:Direct materialsDirect laborVariable manufacturing overheadFixed manufacturing overheadVariable selling and administrative expensesFixed selling and administrative expenses$ 1.70$ 3.00$ 0.80$ 4.85$ 1.20$ 2.00The normal selling price is $21.00 per unit. The company's capacity is 128,400 units per year. An order has been received from a mail-order house for 2,800 units at a special price of $18.00 per unit. This order would not affect regular sales or total fixed costs.Required:1. What is the financial advantage (disadvantage) of accepting the special order?2. As a separate matter from the special order, assume the company's inventory includes 1,000 units that are inferior quality. The unitsmust be sold through regular channels at a reduced price. The company does not expect the selling of these inferior units to affectregular sales. What unit cost is relevant for establishing a minimum selling price for the inferior units?Complete this question by entering your answers in the tabs below.Required 1 Required 2What is the financial advantage (disadvantage) of accepting the special order?

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Description: Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normalactivity level of 94,800 units per year is:Direct materialsDirect laborVariable manufacturing overheadFixed manufacturing

Relevant cost will be equal to variable selling and admin expense only, because units are already…

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activity level of 94,800 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 1.70 $ 3.00 $0.80 $ 4.85 $ 1.20 $ 2.00 The normal selling price is $21.00 per unit. The company's capacity is 128,400 units per year. An order ha order house for 2,800 units at a special price of $18.00 per unit. This order would not affect regular sales Required:

activity level of 94,800 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 1.70 $ 3.00 $0.80 $ 4.85 $ 1.20 $ 2.00 The normal selling price is $21.00 per unit. The company's capacity is 128,400 units per year. An order ha order house for 2,800 units at a special price of $18.00 per unit. This order would not affect regular sales Required:

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.

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Question

Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal
activity level of 94,800 units per year is:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling and administrative expenses
Fixed selling and administrative expenses
$ 1.70
$ 3.00
$ 0.80
$ 4.85
$ 1.20
$ 2.00
The normal selling price is $21.00 per unit. The company's capacity is 128,400 units per year. An order has been received from a mail-
order house for 2,800 units at a special price of $18.00 per unit. This order would not affect regular sales or total fixed costs.
Required:
1. What is the financial advantage (disadvantage) of accepting the special order?
2. As a separate matter from the special order, assume the company's inventory includes 1,000 units that are inferior quality. The units
must be sold through regular channels at a reduced price. The company does not expect the selling of these inferior units to affect
regular sales. What unit cost is relevant for establishing a minimum selling price for the inferior units?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
What is the financial advantage (disadvantage) of accepting the special order?

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