JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement For Year Ended December 31 Sales (430,000 units) Variable costs Direct materials Direct labor Variable overhead Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income Per Unit $ 6.00 1.37 0.33 0.60 3.70 0.20 0.15 $ 3.35 Required: 1. Compute income from the special offer. 2. Should the company accept or reject the special offer? Annual Total $ 2,580,000 589,100 141,900 258,000 1,591,000 86,000 64,500 $ 1,440,500 A potential customer offers to buy 53,000 units for $2.80 each. These sales would not affect the company's sales through its normal channels. Details 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 $0.40 because the offer would require overtime pay. Accepting the offer would require incremental fixed general and administrative costs of $5,300. Accepting the offer would require no incremental fixed overhead costs.
JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement For Year Ended December 31 Sales (430,000 units) Variable costs Direct materials Direct labor Variable overhead Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income Per Unit $ 6.00 1.37 0.33 0.60 3.70 0.20 0.15 $ 3.35 Required: 1. Compute income from the special offer. 2. Should the company accept or reject the special offer? Annual Total $ 2,580,000 589,100 141,900 258,000 1,591,000 86,000 64,500 $ 1,440,500 A potential customer offers to buy 53,000 units for $2.80 each. These sales would not affect the company's sales through its normal channels. Details 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 $0.40 because the offer would require overtime pay. Accepting the offer would require incremental fixed general and administrative costs of $5,300. Accepting the offer would require no incremental fixed overhead costs.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 23-5A (Algo) Special offer pricing LO P7
JART manufactures and sells underwater markers. Its contribution margin income statement follows.
Contribution Margin Income Statement
For Year Ended December 31
Sales (430,000 units)
Variable costs
Direct materials
Direct labor
Variable overhead
Contribution margin
Fixed costs
Fixed overhead
Fixed general and administrative
Income
Per Unit
$ 6.00
1.37
0.33
0.60
3.70
0.20
0.15
$ 3.35
Annual Total
Required:
1. Compute income from the special offer.
2. Should the company accept or reject the special offer?
$ 2,580,000
589,100
141,900
258,000
1,591,000
86,000
64,500
$1,440,500
A potential customer offers to buy 53,000 units for $2.80 each. These sales would not affect the company's sales through its normal
channels. Details 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 $0.40 because the offer would require overtime pay.
Accepting the offer would require incremental fixed general and administrative costs of $5,300.
Accepting the offer would require no incremental fixed overhead costs.
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