JART manufactures and sells underwater markers. Its contribution margin income statement follows Contribution Margin Income Statement For Year Ended December 31 Sales (590,000 units) Variable costs Direct materials Direct labor Varlable overhead Contribution margin Fixed costs Fixed overhead Per Unit $ 6.00 Annual Total $ 3,540,000 1.63 0.47 0.50 961,700 277,300 295,000 2,006,000 3.40 0.20 118,000 Fixed general and administrative 0.15 88,500 Income $ 3.05 $ 1,799,500 A potential customer offers to buy 69,000 units for $3.00 each. These sales would not affect the company's sales through its normal channels. Detals about the special offer follow. • Direct materials cost per unit and variable overhead cost per unit would not change • Direct labor cost per unit would be $0.50 because the offer would require overtime pay Accepting the offer would require incremental fixed general and administrative costs of $6,900. Accepting the offer would require no incremental fixed overhead costs. Required: 1. Compute income from the special offer. 2. Should the company accept or reject the special offer?

JART manufactures and sells underwater markers. Its contribution margin income statement follows Contribution Margin Income Statement For Year Ended December 31 Sales (590,000 units) Variable costs Direct materials Direct labor Varlable overhead Contribution margin Fixed costs Fixed overhead Per Unit $ 6.00 Annual Total $ 3,540,000 1.63 0.47 0.50 961,700 277,300 295,000 2,006,000 3.40 0.20 118,000 Fixed general and administrative 0.15 88,500 Income $ 3.05 $ 1,799,500 A potential customer offers to buy 69,000 units for $3.00 each. These sales would not affect the company's sales through its normal channels. Detals about the special offer follow. • Direct materials cost per unit and variable overhead cost per unit would not change • Direct labor cost per unit would be $0.50 because the offer would require overtime pay Accepting the offer would require incremental fixed general and administrative costs of $6,900. Accepting the offer would require no incremental fixed overhead costs. Required: 1. Compute income from the special offer. 2. Should the company accept or reject the special offer?

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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Subject: accounting
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