Fish Finder Company manufactures sonars for fishing boats. Model 100 sells for $400. They produce and sell 6,000 units per year. Cost data are as follows: Direct Materials Direct Labor Variable manufacturing overhead Fixed manufacturing overhead $25 $65 $15 $280,000 increases by $7,500 increases by $2,100 O increases by $400 decreases by $7,500 per unit per unit per unit per year An offer has come in for a one-time sale of 300 units at a special price of $130 per unit. The marketing manager says. that the sale will not affect the company's regular sales activities, and that it will not require any variable selling and administrative costs. The production manager says that there is plenty of excess capacity and the sale will not impact fixed costs in any way. What is the effect this deal on operating income?

Fish Finder Company manufactures sonars for fishing boats. Model 100 sells for $400. They produce and sell 6,000 units per year. Cost data are as follows: Direct Materials Direct Labor Variable manufacturing overhead Fixed manufacturing overhead $25 $65 $15 $280,000 increases by $7,500 increases by $2,100 O increases by $400 decreases by $7,500 per unit per unit per unit per year An offer has come in for a one-time sale of 300 units at a special price of $130 per unit. The marketing manager says. that the sale will not affect the company's regular sales activities, and that it will not require any variable selling and administrative costs. The production manager says that there is plenty of excess capacity and the sale will not impact fixed costs in any way. What is the effect this deal on operating income?

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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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Fish Finder Company manufactures sonars for fishing boats. Model 100 sells for $400. They produce and sell 6,000
units per year. Cost data are as follows:
$25
$65
$15
$280,000
An offer has come in for a one-time sale of 300 units at a special price of $130 per unit. The marketing manager says.
that the sale will not affect the company's regular sales activities, and that it will not require any variable selling and
administrative costs. The production manager says that there is plenty of excess capacity and the sale will not impact
fixed costs in any way. What is the effect this deal on operating income?
Direct Materials
Direct Labor
Variable manufacturing overhead
Fixed manufacturing overhead
increases by $7,500
increases by $2,100
O increases by $400
decreases by $7,500
per unit
per unit
per unit
per year

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