JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement For Year Ended December 31 Per Unit $7.00 Annual Total $ 4,200,000 Sales (600,000 units) Variable costs Direct materials Direct labor Variable overhead 1.64 954,000 0.56 336,000 0.60 360,000 Contribution margin Fixed costs 4.20 2,520,000 Fixed overhead 0.20 120,000 90,000 Fixed general and administrative 0.15 Income $ 3.85 $ 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 m 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 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 Per Unit $7.00 Annual Total $ 4,200,000 Sales (600,000 units) Variable costs Direct materials Direct labor Variable overhead 1.64 954,000 0.56 336,000 0.60 360,000 Contribution margin Fixed costs 4.20 2,520,000 Fixed overhead 0.20 120,000 90,000 Fixed general and administrative 0.15 Income $ 3.85 $ 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 m 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 Required: 1. Compute income from the special offer 2. Should the company accept or reject the special offer?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 21E: Ellerson Company provided the following information for the last calendar year: During the year,...
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Question
Transcribed Image Text:Sales
Variable costs
Special Offer Analysis
Direct materials
Direct labor
Variable overhead
Contribution margin
Fixed costs
Fixed overhead
Fixed general and administrative
Income (loss)
333
3
Per Unit
7.00 $
1.64
0.56
0.60
4.20
0.20
0.15
3.85
*>
Total
4,200.000
984,000
336,000
360,000
2,520,000
120,000
90,000
2,310,000
Transcribed Image Text:JART manufactures and sells underwater markers. Its contribution margin income statement follows.
Contribution Margin Income Statement
For Year Ended December 31
Annual Total
Sales (600,000 units)
Variable costs
Per Unit
$ 7.00
$ 4,200,000
Direct materials
Direct labor
984,000
1.64
0.56
336,000
Variable overhead
0.60
360,000
Contribution margin
Fixed costs
4.20
2,520,000
Fixed overhead
0.20
Fixed general and administrative
120,000
90,000
0.15
Income
$ 3.85
$ 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
Required:
1. Compute income from the special offer.
2. Should the company accept or reject the special offer?
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