Kneller Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 22,000 medals each month; current monthly production is 10,000 medals. The company normally charges $116 per medal. Cost data for the current level of production are shown below: Variable costs: Direct materials$562,300Direct labor$180,000Selling and administrative$29,200Fixed costs: Manufacturing$168,500Selling and administrative$92,200 The company has just received a special one-time order for 500 medals at $103 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Assume that direct labor is a variable cost. Required:Should the company accept this special order?

Relevant cost to consider: Direct material cost per modal. (562,300/10000) 56.23 Direct labour…

Answered: Kneller Co. manufactures and sells…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

Kneller Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 22,000 medals each month; current monthly production is 10,000 medals. The company normally charges $116 per medal. Cost data for the current level of production are shown below:


Variable costs:
Direct materials	$	562,300
Direct labor	$	180,000
Selling and administrative	$	29,200
Fixed costs:
Manufacturing	$	168,500
Selling and administrative	$	92,200

The company has just received a special one-time order for 500 medals at $103 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Assume that direct labor is a variable cost.

Required:

Should the company accept this special order?

Expert Solution

Step 1

Relevant cost to consider:

Direct material cost per modal. (562,300/10000)	56.23
Direct labour (180,000/10000)	18
Total relevant cost (56.23 + 18)	74.23
Special order price per medal	103

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions