JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement Per Unit $ 7.00 For Year Ended December 31 Sales (600,000 units) Variable costs Direct materials Direct labor Variable overhead Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income 1.64 0.56 0.60 4.20 0.20 0.15 $ 3.85 Annual Total $ 4,200,000 984,000 336,000 360,000 2,520,000 120,000 90,000 $ 2,310,000 A potential customer offers to buy 70,000 units for $3.60 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 $0.71 because the offer would require overtime pay. • Accepting the offer would require incremental fixed general and administrative costs of $7,000. • 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 Per Unit $ 7.00 For Year Ended December 31 Sales (600,000 units) Variable costs Direct materials Direct labor Variable overhead Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income 1.64 0.56 0.60 4.20 0.20 0.15 $ 3.85 Annual Total $ 4,200,000 984,000 336,000 360,000 2,520,000 120,000 90,000 $ 2,310,000 A potential customer offers to buy 70,000 units for $3.60 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 $0.71 because the offer would require overtime pay. • Accepting the offer would require incremental fixed general and administrative costs of $7,000. • 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:JART manufactures and sells underwater markers. Its contribution margin income statement follows.
Contribution Margin Income Statement
Per Unit
$ 7.00
For Year Ended December 31
Sales (600,000 units)
Variable costs
Direct materials
Direct labor
Variable overhead
Contribution margin
Fixed costs
Fixed overhead
Fixed general and administrative
Income
1.64
0.56
0.60
4.20
0.20
0.15
$ 3.85
.
Annual Total
$ 4,200,000
984,000
336,000
360,000
2,520,000
120,000
90,000
$ 2,310,000
A potential customer offers to buy 70,000 units for $3.60 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 $0.71 because the offer would require overtime pay.
Accepting the offer would require incremental fixed general and administrative costs of $7,000.
Accepting the offer would require no incremental fixed overhead costs.
Transcribed Image Text:Required:
1. Compute income from the special offer.
2. Should the company accept or reject the special offer?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Compute income from the special offer. (Round your "Per Unit" answers to 2 decimal places.)
Special Offer Analysis
Contribution margin
Fixed overhead
Fixed general and administrative
Income (loss)
Show Transcribed Text
< Required 1
Required:
1. Compute income from the special offer.
2. Should the company accept or reject the special offer?
Required 1
Per Unit
Required 2
Should the company accept or reject the special offer?
Should the company accept or reject the special offer?
Ĵ
Complete this question by entering your answers in the tabs below.
< Required 1
Total
Required 2 >
c
Required 2 >
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