Dewey Manufacturing has been approached by a new customer with an offer to purchase 500 units of its hands-free automotive model SMAK at a price of $15,000 per unit. Existing sales would not be affected, and Dewey has sufficient capacity to produce the special order. Fixed overhead will not change if Dewey accepts the order or not. Unit cost data is: Per Unit: Direct Materials $6,000 Direct Labor $2,500 Variable OVHD $3,500 Fixed OVHD $10,000 $22,000 Normal sales price is $27,000. Assume Dewey decides to accept the order. How much will their operating income change? Should they have accepted the order
Dewey Manufacturing has been approached by a new customer with an offer to purchase 500 units of its hands-free automotive model SMAK at a price of $15,000 per unit. Existing sales would not be affected, and Dewey has sufficient capacity to produce the special order. Fixed overhead will not change if Dewey accepts the order or not. Unit cost data is: Per Unit: Direct Materials $6,000 Direct Labor $2,500 Variable OVHD $3,500 Fixed OVHD $10,000 $22,000 Normal sales price is $27,000. Assume Dewey decides to accept the order. How much will their operating income change? Should they have accepted the order
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Dewey Manufacturing has been approached by a new customer with an offer to purchase 500 units of its hands-free automotive model SMAK at a price of $15,000 per unit. Existing sales would not be affected, and Dewey has sufficient capacity to produce the special order. Fixed overhead will not change if Dewey accepts the order or not.
Unit cost data is:
|
|
Per Unit: |
|
Direct Materials |
$6,000 |
|
Direct Labor |
$2,500 |
|
Variable OVHD |
$3,500 |
|
Fixed OVHD |
$10,000 |
|
|
$22,000 |
Normal sales price is $27,000.
Assume Dewey decides to accept the order. How much will their operating income change? Should they have accepted the order
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