Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 103,200 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 2.00 $ 4.00 $ 0.70 $ 3.85 $ 1.50 $ 3.00 The normal selling price is $22.00 per unit. The company's capacity is 116,400 units per year. An order has been received from a mail- order house for 1,100 units at a special price of $19.00 per unit. This order would not affect regular sales or the company's total fixed costs. Required: 1. What is the financial advantage (disadvantage) of accepting the special order? 2. As a separate matter from the special order, assume the company's inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for the inferior units?
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 103,200 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 2.00 $ 4.00 $ 0.70 $ 3.85 $ 1.50 $ 3.00 The normal selling price is $22.00 per unit. The company's capacity is 116,400 units per year. An order has been received from a mail- order house for 1,100 units at a special price of $19.00 per unit. This order would not affect regular sales or the company's total fixed costs. Required: 1. What is the financial advantage (disadvantage) of accepting the special order? 2. As a separate matter from the special order, assume the company's inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for the inferior units?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Required 1 Required 2
What is the financial advantage (disadvantage) of accepting the special order?
Required 1
Required 2
Show Transcribed Text
Ű
Relevant cost per unit
< Required 1
< Required 1
Ċ
As a separate matter from the special order, assume the company's inventory includes 1,000 units of this product that were
produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced
prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model.
What unit cost is relevant for establishing a minimum selling price for the inferior units? (Round your answer to 2 decimal
places.)
Required 2 >
Required 2 >
Show less A
Transcribed Image Text:Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal
activity level of 103,200 units per year is:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling and administrative expenses
Fixed selling and administrative expenses
$ 2.00
$ 4.00
$ 0.70
$ 3.85
$1.50
$ 3.00
The normal selling price is $22.00 per unit. The company's capacity is 116,400 units per year. An order has been received from a mail-
order house for 1,100 units at a special price of $19.00 per unit. This order would not affect regular sales or the company's total fixed
costs.
Required:
1. What is the financial advantage (disadvantage) of accepting the special order?
2. As a separate matter from the special order, assume the company's inventory includes 1,000 units of this product that were
produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The
company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is
relevant for establishing a minimum selling price for the inferior units?
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