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Corporation has received a request for a special order of 5,500 units of product F65 for $27.70 each. Product F65's unit product cost is $27.20, determined as follows: Direct materials Direct labor $2.95 8.25 Variable manufacturing overhead 7.35 Fixed manufacturing overhead Unit product cost 8.65 $27.20 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product F65 that would increase the variable costs by $4.00 per unit and that would require an investment of $19,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by: a. $(38,250) b. $9,325 c. $2,750 d. $(85,250)

Corporation has received a request for a special order of 5,500 units of product F65 for $27.70 each. Product F65's unit product cost is $27.20, determined as follows: Direct materials Direct labor $2.95 8.25 Variable manufacturing overhead 7.35 Fixed manufacturing overhead Unit product cost 8.65 $27.20 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product F65 that would increase the variable costs by $4.00 per unit and that would require an investment of $19,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by: a. $(38,250) b. $9,325 c. $2,750 d. $(85,250)

FINANCIAL ACCOUNTING
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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Corporation has received a request for a special order of 5,500 units of product F65 for $27.70 each. Product F65's unit product cost is $27.20, determined as follows: Direct materials Direct labor $2.95 8.25 Variable manufacturing overhead 7.35 Fixed manufacturing overhead Unit product cost 8.65 $27.20 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product F65 that would increase the variable costs by $4.00 per unit and that would require an investment of $19,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by: a. $(38,250) b. $9,325 c. $2,750 d. $(85,250)
Transcribed Image Text:Corporation has received a request for a special order of 5,500 units of product F65 for $27.70 each. Product F65's unit product cost is $27.20, determined as follows: Direct materials Direct labor $2.95 8.25 Variable manufacturing overhead 7.35 Fixed manufacturing overhead Unit product cost 8.65 $27.20 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product F65 that would increase the variable costs by $4.00 per unit and that would require an investment of $19,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by: a. $(38,250) b. $9,325 c. $2,750 d. $(85,250)
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