Alpha Company currently manufactures and sells 1,000 units of a single product. The following data are per unit costs for 1,000 units: Direct materials £2,400 Direct labour 960 Factory overhead (30% variable) 1,800 Selling expenses (50% variable) 900 Administrative expenses (10% variable) 840 Total per unit £6,900 Recently, Tango Company approached Alpha Company about buying 100 units for £5,100 each. Currently, the model is sold to dealers for £7,800. Assume there is additional capacity for 60 more units and the company has to reduce regular customer sales by 40 units in order to contract the special order. There are selling expenses on only the sales to the regular customers. What is the net income if the special order of 100 units is accepted? a. £831,960. b. £876,960. c. £1,011,600. d. £900,000.
Alpha Company currently manufactures and sells 1,000 units of a single product. The following data are per unit costs for 1,000 units: Direct materials £2,400 Direct labour 960 Factory overhead (30% variable) 1,800 Selling expenses (50% variable) 900 Administrative expenses (10% variable) 840 Total per unit £6,900 Recently, Tango Company approached Alpha Company about buying 100 units for £5,100 each. Currently, the model is sold to dealers for £7,800. Assume there is additional capacity for 60 more units and the company has to reduce regular customer sales by 40 units in order to contract the special order. There are selling expenses on only the sales to the regular customers. What is the net income if the special order of 100 units is accepted? a. £831,960. b. £876,960. c. £1,011,600. d. £900,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Alpha Company currently manufactures and sells 1,000 units of a single product. The following data are per unit costs for 1,000 units:
Direct materials £2,400
Direct labour 960
Factory overhead (30% variable) 1,800
Selling expenses (50% variable) 900
Administrative expenses (10% variable)
840
Total per unit
£6,900
Recently, Tango Company approached Alpha Company about buying 100 units for £5,100 each. Currently, the model is sold to dealers for £7,800.
Assume there is additional capacity for 60 more units and the company has to reduce regular customer sales by 40 units in order to contract the special order. There are selling expenses on only the sales to the regular customers. What is the net income if the special order of 100 units is accepted?
a. £831,960.
b. £876,960.
c. £1,011,600.
d. £900,000.
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