Finch Company manufactures a personal computer designed for use in schools and markets it under its own label. Finch has the capacity to produce 38,000 units a year but is currently producing and selling only 13,000 units a year. The computer's normal selling price is $1,770 per unit with no volume discounts. The unit-level costs of the computer's production are $600 for direct materials, $260 for direct labor, and $140 for indirect unit-level manufacturing costs. The total product- and facility-level costs incurred by Finch during the year are expected to be $2,240,000 and $815,000, respectively. Assume that Finch receives a special order to produce and sell 3,140 computers at $1,270 each. Required Calculate the contribution to profit from the special order. Should Finch accept or reject the special order? Contribution to profit Should Finch accept or reject the special order?
Finch Company manufactures a personal computer designed for use in schools and markets it under its own label. Finch has the capacity to produce 38,000 units a year but is currently producing and selling only 13,000 units a year. The computer's normal selling price is $1,770 per unit with no volume discounts. The unit-level costs of the computer's production are $600 for direct materials, $260 for direct labor, and $140 for indirect unit-level manufacturing costs. The total product- and facility-level costs incurred by Finch during the year are expected to be $2,240,000 and $815,000, respectively. Assume that Finch receives a special order to produce and sell 3,140 computers at $1,270 each. Required Calculate the contribution to profit from the special order. Should Finch accept or reject the special order? Contribution to profit Should Finch accept or reject the special order?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Finch Company manufactures a personal computer designed for use in schools and markets it under its own label. Finch has the
capacity to produce 38,000 units a year but is currently producing and selling only 13,000 units a year. The computer's normal selling
price is $1,770 per unit with no volume discounts. The unit-level costs of the computer's production are $600 for direct materials, $260
for direct labor, and $140 for indirect unit-level manufacturing costs. The total product- and facility-level costs incurred by Finch during
the year are expected to be $2,240,000 and $815,000, respectively. Assume that Finch receives a special order to produce and sell
3,140 computers at $1,270 each.
Required
Calculate the contribution to profit from the special order. Should Finch accept or reject the special order?
Contribution to profit
Should Finch accept or reject the special order?
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