Gallerani Corporation has received a request for a special order of 5,500 units of product A90 for $27.70 each. Product A90's unit product cost is $27.20, determined as follows: Direct materials $ 2.95 Direct labor Variable manufacturing overhead Fixed manufacturing overhead 8.25 7.35 8.65 Unit product cost $27.20 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 $4.00 per unit and that would require an investment of $19,000 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:

Gallerani Corporation has received a request for a special order of 5,500 units of product A90 for $27.70 each. Product A90's unit product cost is $27.20, determined as follows: Direct materials $ 2.95 Direct labor Variable manufacturing overhead Fixed manufacturing overhead 8.25 7.35 8.65 Unit product cost $27.20 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 $4.00 per unit and that would require an investment of $19,000 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:

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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