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)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...

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