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Farrow Company reports the following annual results. Contribution Margin Income Statement Sales (300, 000 units) Variable costs Direct materials Direct labor Per Unit Annual Total $ 15.00 $ 4,500,000 2.00 4.00 2.50 6.50 600,000 1,200,000 750,000 1,950,000 Overhead Contribution margin Fixed costs Fixed overhead 2.00 600,000 450,000 Fixed general and administrative 1.50 Income $ 3.00 $ 900,000 The company receives a special offer for 30,000 units at $13 per unit. The additional sales would not affect its normal sales. Variable costs per unit would be the same for the special offer as they are for the normal units. The special offer would requ incremental fixed overhead of $120,000 and incremental fixed general and administrative costs of $129,000. (a) Compute the income or loss for the special offer. (b) Should the company accept or reject the special offer? X Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Compute the income or loss for the special offer. (Round your "Per Unit" answers to 2 decimal places.) SPECIAL OFFER ANALYSIS Per Unit Total Sales $ 13.00 $ 390,000 Variable costs Direct materials 2.00 (60,000) Direct labor 4.00 (120,000) Variable overhead 2.50 (75,000) Contribution margin 4.50 135,000 Fixed costs Fixed overhead 2.50 X (120,000) Fixed general and administrative 2.00 X (129,000) Income (loss) 2$ 0.00 $ (114,000) < Required A Required B >

Farrow Company reports the following annual results. Contribution Margin Income Statement Sales (300, 000 units) Variable costs Direct materials Direct labor Per Unit Annual Total $ 15.00 $ 4,500,000 2.00 4.00 2.50 6.50 600,000 1,200,000 750,000 1,950,000 Overhead Contribution margin Fixed costs Fixed overhead 2.00 600,000 450,000 Fixed general and administrative 1.50 Income $ 3.00 $ 900,000 The company receives a special offer for 30,000 units at $13 per unit. The additional sales would not affect its normal sales. Variable costs per unit would be the same for the special offer as they are for the normal units. The special offer would requ incremental fixed overhead of $120,000 and incremental fixed general and administrative costs of $129,000. (a) Compute the income or loss for the special offer. (b) Should the company accept or reject the special offer? X Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Compute the income or loss for the special offer. (Round your "Per Unit" answers to 2 decimal places.) SPECIAL OFFER ANALYSIS Per Unit Total Sales $ 13.00 $ 390,000 Variable costs Direct materials 2.00 (60,000) Direct labor 4.00 (120,000) Variable overhead 2.50 (75,000) Contribution margin 4.50 135,000 Fixed costs Fixed overhead 2.50 X (120,000) Fixed general and administrative 2.00 X (129,000) Income (loss) 2$ 0.00 $ (114,000) < Required A Required B >

FINANCIAL ACCOUNTING
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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Farrow Company reports the following annual results. Annual Total Per Unit $ 15.00 Contribution Margin Income Statement Sales (300,000 units) Variable costs Direct materials Direct labor $ 4,500,000 2.00 4.00 600,000 1,200,000 750,000 1,950,000 2.50 Overhead Contribution margin Fixed costs Fixed overhead 6.50 2.00 600,000 450,000 Fixed general and administrative 1.50 Income $ 3.00 $ 900,000 The company receives a special offer for 30,000 units at $13 per unit. The additional sales would not affect its normal sales. Variable costs per unit would be the same for the special offer as they are for the normal units. The special offer would require incremental fixed overhead of $120,000 and incremental fixed general and administrative costs of $129,000. (a) Compute the income or loss for the special offer. (b) Should the company accept or reject the special offer? X Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Compute the income or loss for the special offer. (Round your "Per Unit" answers to 2 decimal places.) SPECIAL OFFER ANALYSIS Per Unit Total Sales 2$ 13.00 2$ 390,000 Variable costs Direct materials 2.00 (60,000) Direct labor 4.00 (120,000) Variable overhead 2.50 (75,000) Contribution margin 4.50 135,000 Fixed costs Fixed overhead 2.50 X (120,000) Fixed general and administrative 2.00 (129,000) Income (loss) 0.00 $ (114,000) < Required A Required B > O00 O000
Transcribed Image Text:Farrow Company reports the following annual results. Annual Total Per Unit $ 15.00 Contribution Margin Income Statement Sales (300,000 units) Variable costs Direct materials Direct labor $ 4,500,000 2.00 4.00 600,000 1,200,000 750,000 1,950,000 2.50 Overhead Contribution margin Fixed costs Fixed overhead 6.50 2.00 600,000 450,000 Fixed general and administrative 1.50 Income $ 3.00 $ 900,000 The company receives a special offer for 30,000 units at $13 per unit. The additional sales would not affect its normal sales. Variable costs per unit would be the same for the special offer as they are for the normal units. The special offer would require incremental fixed overhead of $120,000 and incremental fixed general and administrative costs of $129,000. (a) Compute the income or loss for the special offer. (b) Should the company accept or reject the special offer? X Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Compute the income or loss for the special offer. (Round your "Per Unit" answers to 2 decimal places.) SPECIAL OFFER ANALYSIS Per Unit Total Sales 2$ 13.00 2$ 390,000 Variable costs Direct materials 2.00 (60,000) Direct labor 4.00 (120,000) Variable overhead 2.50 (75,000) Contribution margin 4.50 135,000 Fixed costs Fixed overhead 2.50 X (120,000) Fixed general and administrative 2.00 (129,000) Income (loss) 0.00 $ (114,000) < Required A Required B > O00 O000
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