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 87,600 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 2.20 $ 4.00 $ 0.70 $ 4.25 $ 1.80 $ 3.00 The normal selling price is $20.00 per unit. The company's capacity is 111,600 units per year. An order has been received from a mail-order house for 2,000 units at a special price of $17.00 per unit. This order would not affect regular sales or 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 that are inferior quality. The units must be sold through regular channels at a reduced price. The company does not expect the selling of these inferior units to affect regular sales. What unit cost is relevant for establishing a minimum selling price for the inferior units? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order?
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 87,600 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 2.20 $ 4.00 $ 0.70 $ 4.25 $ 1.80 $ 3.00 The normal selling price is $20.00 per unit. The company's capacity is 111,600 units per year. An order has been received from a mail-order house for 2,000 units at a special price of $17.00 per unit. This order would not affect regular sales or 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 that are inferior quality. The units must be sold through regular channels at a reduced price. The company does not expect the selling of these inferior units to affect regular sales. What unit cost is relevant for establishing a minimum selling price for the inferior units? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Concept explainers
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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Question
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 87,600 units per year is:
Direct materials
Direct labor
Variable manufacturing overhead
$ 2.20
$ 4.00
$ 0.70
$ 4.25
Variable selling and administrative expenses
Fixed selling and administrative expenses
$ 1.80
$ 3.00
Fixed manufacturing overhead
5
The normal selling price is $20.00 per unit. The company's capacity is 111,600 units per year. An order has been received
from a mail-order house for 2,000 units at a special price of $17.00 per unit. This order would not affect regular sales or 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 that are inferior quality.
The units must be sold through regular channels at a reduced price. The company does not expect the selling of these
inferior units to affect regular sales. What unit cost is relevant for establishing a minimum selling price for the inferior
units?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
What is the financial advantage (disadvantage) of accepting the special order?
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