Delta Company produces a single product. The cost of producing and selling a single unit of the product at the company’s normal activity level of 60,000 units per year is: Rs. DM 510 DL 380 Variable MOH 100 Fixed MOH 420 Variable Selling and Admin 150 Fixed Selling and Admin 240 The normal selling price per unit is 2100. The company’s capacity is 75,000 per year. An order has been received from the customer to produced 15,000 units at a special price of 1600 per unit. The special order has following conditions: 1- The special order must be delivered with logo of the customer, for which the company has to incur an additional cost of 50rs per unit. 2- The special order required special material and the cost of the material will be increased by 5% of the existing cost. 3- The special order required a machine which cost Rs 532,500 for the company. 4- The workers have to pay extra time allowance of additional Rs. 50 per unit. Required: a) Should the company accept the special order or not. b) If special is accepted, calculate the total profit of the company including special order units.
Delta Company produces a single product. The cost of producing and selling a single unit of the product at the company’s normal activity level of 60,000 units per year is:
Rs.
DM 510
DL 380
Variable MOH 100
Fixed MOH 420
Variable Selling and Admin 150
Fixed Selling and Admin 240
The normal selling price per unit is 2100. The company’s capacity is 75,000 per year. An order has been received from the customer to produced 15,000 units at a special price of 1600 per unit. The special order has following conditions:
1- The special order must be delivered with logo of the customer, for which the company has to incur an additional cost of 50rs per unit.
2- The special order required special material and the cost of the material will be increased by 5% of the existing cost.
3- The special order required a machine which cost Rs 532,500 for the company.
4- The workers have to pay extra time allowance of additional Rs. 50 per unit.
Required:
- a) Should the company accept the special order or not.
- b) If special is accepted, calculate the total profit of the company including special order units.
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