on Kargin Income Statement ,000 units) Dets aterials abor on margin . erhead meral and administrative Per Unit $15.00 2.00 4.00 2.50 2.00 1.50 $ 3.00 Annual Total $4,000,000 440,000 1,200,000 800,000 2,000,000 640,000 480,000 $ 960,000
on Kargin Income Statement ,000 units) Dets aterials abor on margin . erhead meral and administrative Per Unit $15.00 2.00 4.00 2.50 2.00 1.50 $ 3.00 Annual Total $4,000,000 440,000 1,200,000 800,000 2,000,000 640,000 480,000 $ 960,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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Transcribed Image Text:Exercise 10-13 (Algo) Special offer pricing LO P7
Farrow Company reports the following annual results.
Contribution Margin Income Statement
Sales (320,000 unita)
Variable costs
Direct materials
Direct labor
Overhead
Contribution margin
Fixed costs
Fixed overhead
Fixed general and administrative
Incone
Required A Required B
Compute the income or loss for the special offer.
Note: Round your "Per Unit" answers to 2 decimal places.
SPECIAL OFFER ANALYSIS
Sales
Variable costs
Direct materials
Direct labor
Variable overhead
Contribution margin
Per Unit
$15.00
The company receives a special offer for 32.000 units at $12 per unit. The additional sales would not affect its normal sales. Variable
costs per unit would be the same for the special offer as they are for the normal units. The special offer would require incremental
fixed overhead of $128,000 and incremental fixed general and administrative costs of $138,000.
Fixed overhead
Fixed general and administrative
(a) Compute the income or loss for the special offer.
(b) Should the company accept or reject the special offer?
Complete this question by entering your answers in the tabs below.
Income (los)
2.00
4.00
2.50
6.50
$
2.00
1.50
$ 3.00
Annual Total
$ 4,800,000
Per Unit
440,000
1,200,000
800,000
2,000,000
2.00
4.00
2.50
640,000
480,000
$ 960,000
15.00 $
6.50
2.00
1.50
3.00 $
Total
Required B
4,800,000
640,000
1,280,000
800,000
2,080,000
2,080,000
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