**Exercise 21.12 (Static) Pricing a Special Order (LO21-1, LO21-2, LO21-3)**Mazeppa Corporation sells relays at a selling price of $28 per unit. The company's cost per unit, based on full capacity of 160,000 units, is as follows:- Direct materials: $6- Direct labor: $4- Overhead (2/3 of which is variable): $9Mazeppa has been approached by a distributor in Montana offering to buy a special order consisting of 30,000 relays. Mazeppa has the capacity to fill the order. However, it will incur an additional shipping cost of $2 for each relay it sells to the distributor.**a-1.** Assume that Mazeppa is currently operating at a level of 100,000 units. Show the calculation for the unit price to charge the distributor which will generate an increase in operating income of $2 per unit?**a-2.** What is your interpretation of the changes to the contribution margin per unit and the operating income on account of the unit price charged to the distributor?**b-1.** Assume that Mazeppa is currently operating at full capacity. Show the calculation for the unit price to charge the distributor which will generate an increase in operating income of $60,000 more than it would be without accepting the special order?**b-2.** What is your interpretation of the changes to the contribution margin per unit and the operating income on account of the unit price charged to the distributor?Complete this question by entering your answers in the tabs below.- Req A1- Req A2- Req B1- Req B2[Note: The image includes a section with navigation options labeled "Prev" and "Next", indicating multiple pages for the exercise solutions.] ### Educational Website Transcription and Explanation#### Text Content**Questions:**a-2. What is your interpretation of an increase in operating income of $2 per unit?b-1. Assume that Mazeppa is currently operating at full capacity. Show the calculation for the unit price to charge the distributor which will generate an increase in operating income of $60,000 more than it would be without accepting the special order.b-2. What is your interpretation of the changes to the contribution margin per unit and the operating income on account of the price charged to the distributor?#### InstructionsComplete this question by entering your answers in the tabs below.- **Tabs:** - Req A1 - Req A2 - Req B1 - Req B2#### Calculation TaskAssume that Mazeppa is currently operating at a level of 100,000 units. Show the calculation for the unit price to charge the distributor which will generate an increase in operating income of $2 per unit. (Do not round intermediate calculations.)#### Diagram Explanation**Table:**The table is labeled "Special Sale" and includes the following rows for calculation:- **Selling price:** This is the price at which the item is sold during the special sale.- **Less: Direct materials:** The direct cost of materials required to produce the product.- **Direct labor:** The direct cost of the workforce needed for production.- **Variable overhead:** Costs that vary with production volume, such as utilities for machinery.- **Additional shipping costs:** Any extra costs incurred to ship the product during the special sale.- **Contribution margin per unit:** The selling price minus direct costs (materials, labor, overhead, shipping) to determine what is left to cover fixed costs and profit.This structured table helps in calculating the unit price necessary to achieve the specified increase in operating income.

operating income of $2 per unit? foP the unit price to charge th a-2. What is your interpretation of the changes to the contribution margin per unit and the operating income on account of the price charged to the distributor? b-1. Assume that Mazeppa is currently operating at full capacity. Show the calculation for the unit price to charge the distributo will generate an increase in operating income of $60,000 more than it would be without accepting the special order? b-2. What is your interpretation of the changes to the contribution margin per unit and the operating income on account of the price charged to the distributor? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 Assume that Mazeppa is currently operating at a level of 100,000 units. Show the calculation for the unit price to charge the distributor which will generate an increase in operating income of $2 per unit? (Do not round intermediate calculations.) Special Sale Selling price Less: Direct materials Direct labor Variable overhead Additional shipping costs Contribution margin per unit Req AT Req A2 < Prev 1 of 4 Next > .. 23 NOV 17 étv li

operating income of $2 per unit? foP the unit price to charge th a-2. What is your interpretation of the changes to the contribution margin per unit and the operating income on account of the price charged to the distributor? b-1. Assume that Mazeppa is currently operating at full capacity. Show the calculation for the unit price to charge the distributo will generate an increase in operating income of $60,000 more than it would be without accepting the special order? b-2. What is your interpretation of the changes to the contribution margin per unit and the operating income on account of the price charged to the distributor? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 Assume that Mazeppa is currently operating at a level of 100,000 units. Show the calculation for the unit price to charge the distributor which will generate an increase in operating income of $2 per unit? (Do not round intermediate calculations.) Special Sale Selling price Less: Direct materials Direct labor Variable overhead Additional shipping costs Contribution margin per unit Req AT Req A2 < Prev 1 of 4 Next > .. 23 NOV 17 étv li

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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