Answered: Determine the effect in income when the…

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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Angel Company expects to sell 500,000 units in 2021 at P50 per unit. Variable manufacturing costs in producing the product amount to P20 per unit and fixed manufacturing costs amount to P12.50 per unit.

A special order from Saints Company of 50,000 units were made at an offered price of P28.75 per unit. Regular sales from customers will not be affected from this transaction. However, in order to meet the specifications and requirements of Saints Company, overtime pay would be incurred amounting to P3.75 per unit.

Determine the effect in income when the special order is accepted. Indicate whether increase or decrease

250,000 increase
375,000 decrease
437,500 increase
187,500 decrease

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