Assume a company is considering whether to accept or reject a special order opportunity to sell a customer 300 units of a slightly customized version of one of its products for $40.25. The normal selling price of this product is $48 per unit. It can fulfill the order using existing manufacturing capacity. The company’s accounting system estimates the following unit product cost for this product: Per UnitDirect materials $18 Direct labor 12 Manufacturing overhead 10 Total cost $40 The company estimates that $3 of its manufacturing overhead varies with respect to the number of units produced. The remainder of its overhead is fixed and unaffected by the volume of units produced within the relevant range. Assuming that this decision will have no effect on sales to other customers, what is the financial advantage (disadvantage) of accepting the special order? Multiple Choice $1,200 $600 $1,500 $2,175

Answered: Assume a company is considering whether…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Assume a company is considering whether to accept or reject a special order opportunity to sell a customer 300 units of a slightly customized version of one of its products for $40.25. The normal selling price of this product is $48 per unit. It can fulfill the order using existing manufacturing capacity. The company’s accounting system estimates the following unit product cost for this product:

	Per Unit
Direct materials		$	18
Direct labor			12
Manufacturing overhead			10
Total cost		$	40

The company estimates that $3 of its manufacturing overhead varies with respect to the number of units produced. The remainder of its overhead is fixed and unaffected by the volume of units produced within the relevant range. Assuming that this decision will have no effect on sales to other customers, what is the financial advantage (disadvantage) of accepting the special order?

Multiple Choice

$1,200
$600
$1,500
$2,175

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