Explorer Company has an annual plant capacity of 3,000 units. Data concerning this product are given below: Direct Materials cost per unit $ 20.00 Direct Labor cost per unit $ 8.00 Variable manufacturing overhead cost per unit $ 5.00 Variable sales commissions per unit $ 6.00 Fixed selling and administration expenses per unit $ 9.00 $ 48.00 Currently, the sales volume at the regular selling price of $75 is 2,500 units per year. The company has received a special order for 500 units at a selling price of $45 each. Regular sales would not be affected, and sales commissions on the 500 units would only be 2/3 of the regular sales commission per unit for this special order. This special order would have no impact on total fixed costs. Required: a. Determine whether the company should accept the special order. Explain in your own words your decision and show all computations.
Explorer Company has an annual plant capacity of 3,000 units. Data concerning this product are given below:
|
|
Direct Materials cost per unit |
$ 20.00 |
|
|
Direct Labor cost per unit |
$ 8.00 |
|
|
Variable |
$ 5.00 |
|
|
Variable sales commissions per unit |
$ 6.00 |
|
|
Fixed selling and administration expenses per unit |
$ 9.00 |
|
|
|
$ 48.00 |
Currently, the sales volume at the regular selling price of $75 is 2,500 units per year. The company has received a special order for 500 units at a selling price of $45 each. Regular sales would not be affected, and sales commissions on the 500 units would only be 2/3 of the regular sales commission per unit for this special order. This special order would have no impact on total fixed costs.
Required:
a. Determine whether the company should accept the special order. Explain in your own words your decision and show all computations.
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