rr Exercise 10-13 (Algo) Special offer pricing LO P7Farrow Company reports the following annual results.Contribution Margin Income StatementSales (320,000 unita)Variable costsDirect materialsDirect laborOverheadContribution marginFixed costsFixed overheadFixed general and administrativeInconeRequired A Required BCompute the income or loss for the special offer.Note: Round your "Per Unit" answers to 2 decimal places.SPECIAL OFFER ANALYSISSalesVariable costsDirect materialsDirect laborVariable overheadContribution marginPer Unit$15.00The company receives a special offer for 32.000 units at $12 per unit. The additional sales would not affect its normal sales. Variablecosts per unit would be the same for the special offer as they are for the normal units. The special offer would require incrementalfixed overhead of $128,000 and incremental fixed general and administrative costs of $138,000.Fixed overheadFixed 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)2.004.002.506.50$2.001.50$ 3.00Annual Total$ 4,800,000Per Unit440,0001,200,000800,0002,000,0002.004.002.50640,000480,000$ 960,00015.00 $6.502.001.503.00 $TotalRequired B4,800,000640,0001,280,000800,0002,080,0002,080,000

To determine whether the special order must be accepted or not, the relevant cost and relevant…

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

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 12.16E: Product cost concept of product pricing Based on the data presented in Exercise 12-15, assume that...

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Anchor Company manufactures a variety of tool boxes. The firm is currently operating at 80% of its full capacity of 6,000 machine- hours per month. Each unit requires 30 minutes of machine time. Its sales manager has been looking for special orders to make productive use of the excess capacity. JCL Ltd., a potential customer, has offered to buy 10,000 tool boxes at $11.90 per box, provided that the entire quantity is delivered in two months. The current per-box cost data are as follows: Direct materials. Direct labour (½ hour at $10.40/hour) Total manufacturing overhead Total unit product cost $ 3.60 5.20 3.10 $11.90 Both fixed and variable overhead are allocated using direct labour-hours as a base. Variable overhead is $2.60 per direct labour-hour. Without the order, Anchor would have enough business to operate at 4,800 direct labour-hours in each of the next two months. The regular selling price of the tool boxes is $14.90. A sales commission of 50 cents per unit is paid to sales…
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Smithen Company, a wholesale distributor, has been operating for only a few months. The company sells three products-sinks, mirrors, and vanities. Budgeted sales by product and in total for the coming month are shown below based on planned unit sales as follows: Sinks Mirrors Vanities Total Units 1,000 500 500 2,000 Percentage of total sales Sales Variable expenses Contribution margin Contribution margin per unit Fixed expenses Operating income Break-even point in unit sales: Percentage sex 25% 25% 100% Break-even point in sales dollars: Total Fixed expenses. Weighted-average CM per unit Sinks 48% Product Mirrors 20% $264,000 100.00% $110,000 100.00% $176,000 100.00% $550,000 100.00% 80,000 30.30% 72,000 65.45% 82,000 46.59% 219,300 39.87% 53.41% 60.13% $184,000 $ 94,000 330,700 69.70% 38,000 34.55% S 76.00 $ 184.00 $ 188.00 Fixed expenses Overall CM ratio $293,300 $158.00 Vanities 32% $293,300 0.60 1,856.33 units Total 100% 293,300 $ 37,400 = $487,798.61 *($184.00 0.50) + ($76.00 x…
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