Gallerani Corporation has received a request for a special order of 4,500 units of product A90 for $27.10 each. Product A90's unit product cost is $26.80, determined as follows: $ 2.65 7.95 Variable manufacturing overhead 7.05 Fixed manufacturing overhead 9.15 Unit product cost $26.80 Assume that direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product A90 that would increase the variable costs by $3.50 per unit and that would require an investment of $24,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be: O $2,775 $(61,650) Direct materials Direct labor O $1,350 $(38,400)

Gallerani Corporation has received a request for a special order of 4,500 units of product A90 for $27.10 each. Product A90's unit product cost is $26.80, determined as follows: $ 2.65 7.95 Variable manufacturing overhead 7.05 Fixed manufacturing overhead 9.15 Unit product cost $26.80 Assume that direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product A90 that would increase the variable costs by $3.50 per unit and that would require an investment of $24,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be: O $2,775 $(61,650) Direct materials Direct labor O $1,350 $(38,400)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...

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