Company has an annual plant capacity of 50,000 units. Predicted data on sales and costs are given below. Sales (50 per unit) 1,000,000 Manufacturing cost Variable (material labor and overhead) 40 per unit 30,000 Fixed overhead Selling and administrative expenses Variable (sales commission RS 0.5 per unit) 2 per unit 7,000 Fixed A special order has been received from outside for 5,000 units at a selling price of 45 per unit this order will no effect on regular sales. The usual sales commission on this order will be reduced by one half. Required: a. Should the company accept / reject the order? b. Keeping in view the above answer narrate rationale to support your answer
Company has an annual plant capacity of 50,000 units. Predicted data on sales and costs are given below. Sales (50 per unit) 1,000,000 Manufacturing cost Variable (material labor and overhead) 40 per unit 30,000 Fixed overhead Selling and administrative expenses Variable (sales commission RS 0.5 per unit) 2 per unit 7,000 Fixed A special order has been received from outside for 5,000 units at a selling price of 45 per unit this order will no effect on regular sales. The usual sales commission on this order will be reduced by one half. Required: a. Should the company accept / reject the order? b. Keeping in view the above answer narrate rationale to support your answer
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Solve the following problem given in attachment.
Transcribed Image Text:Company has an annual plant capacity of 50,000 units. Predicted data on sales and costs are given below.
Sales (50 per unit)
1,000,000
Manufacturing cost
Variable (material labor and overhead)
40 per unit
30,000
Fixed overhead
Selling and administrative expenses
Variable (sales commission RS 0.5 per unit)
2 per unit
7,000
Fixed
A special order has been received from outside for 5,000 units at a selling price of 45 per unit this order
will no effect on regular sales. The usual sales commission on this order will be reduced by one half.
Required:
a. Should the company accept / reject the order?
b. Keeping in view the above answer narrate rationale to support your answer
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