Narra Company manufactures different designs of love seats. At the start, the company built a large plant with the expectation that the demand for its product will increase once the market is developed. However, at present, the company utilizes only 70% of its plant сaрacity. An account executive received an offer from a large motel chain to purchase 250 units of love seats for a price of P950. Normal selling price for these seats is P1,500 each. Manufacturing costs for the current period's production of 420 love seats are presented below. Fixed cost is expected to be unchanged with the acceptance of the order. Production Costs for 420 units Materials P 147,000 Labor 126,000 Factory Overhead (60% fixed) 252,000 The account executive's commission for this order is 20%. If this special order proves to be acceptable, Narra is willing to reduce sales to regular customers so as not to exceed its plant capacity. What is the net advantage (disadvantage) of accepting the special order?

Narra Company manufactures different designs of love seats. At the start, the company built a large plant with the expectation that the demand for its product will increase once the market is developed. However, at present, the company utilizes only 70% of its plant сaрacity. An account executive received an offer from a large motel chain to purchase 250 units of love seats for a price of P950. Normal selling price for these seats is P1,500 each. Manufacturing costs for the current period's production of 420 love seats are presented below. Fixed cost is expected to be unchanged with the acceptance of the order. Production Costs for 420 units Materials P 147,000 Labor 126,000 Factory Overhead (60% fixed) 252,000 The account executive's commission for this order is 20%. If this special order proves to be acceptable, Narra is willing to reduce sales to regular customers so as not to exceed its plant capacity. What is the net advantage (disadvantage) of accepting the special order?

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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