orice charged to the distributor? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 What is your interpretation of the changes to the contribution rnargin per unit and the operating income on account of the unit price charged to the distributor? (Do not round intermediate calculations.) In order for the company to increase its operating income $60,000 above what it would be without the order, the contribution margin per unit included with the special order must be $2 per unit more ($2 × 30,000 units = $60,000) than the normal contribution margin. The normal contribution margin is the sales price, $28, less all variable costs [ +(2/3 x 1, or $12. Thus, the selling price of the special order must cover the additional shipping costs, and still result in a contribution margin of normal + $2 additional requirement). Therefore, a selling price of is required. < Req B1 Req 82 1 of 4 ... < Prev Next > ... NOV 17 étv li 1 A
orice charged to the distributor? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 What is your interpretation of the changes to the contribution rnargin per unit and the operating income on account of the unit price charged to the distributor? (Do not round intermediate calculations.) In order for the company to increase its operating income $60,000 above what it would be without the order, the contribution margin per unit included with the special order must be $2 per unit more ($2 × 30,000 units = $60,000) than the normal contribution margin. The normal contribution margin is the sales price, $28, less all variable costs [ +(2/3 x 1, or $12. Thus, the selling price of the special order must cover the additional shipping costs, and still result in a contribution margin of normal + $2 additional requirement). Therefore, a selling price of is required. < Req B1 Req 82 1 of 4 ... < Prev Next > ... NOV 17 étv li 1 A
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Question
Transcribed Image Text: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
Direct labor
Overhead (2/3 of which is variable)
Mazeppa 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
Reg B1
Req B2
Prev
1 of 4
Next >
23
NOV
al T2 A
17
tv
280
649
%24
![bričé chárged to the distributor?
Complete this question by entering your answers in the tabs below.
Req A1
Req A2
Req B1
Req B2
What is your interpretation of the changes to the contribution nargin per unit and the operating income on account of the unit price charged to
the distributor? (Do not round intermediate calculations.)
In order for the company to increase its operating income $60,000 above what it would be without the order,
the contribution margin per unit included with the special order must be $2 per unit more ($2 × 30,000 units =
$60,000) than the normal contribution margin. The normal contribution margin is the sales price, $28, less
all variable costs [
+ (2/3 x
], or $12. Thus, the selling price of the
special order must cover the additional shipping costs, and still result in a contribution margin of
normal + $2 additional requirement). Therefore, a selling price of
is required.
< Req B1
Req B2>
Prev
1 of 4
Next >
23
國 2囚
NOV
17
étv
280
MacBook Air](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbed57b3f-4985-4c44-a1d3-1432756d6b0e%2F8329eb68-ab40-4af0-8f28-b204e7c910fd%2F9p07d_processed.jpeg&w=3840&q=75)
Transcribed Image Text:bričé chárged to the distributor?
Complete this question by entering your answers in the tabs below.
Req A1
Req A2
Req B1
Req B2
What is your interpretation of the changes to the contribution nargin per unit and the operating income on account of the unit price charged to
the distributor? (Do not round intermediate calculations.)
In order for the company to increase its operating income $60,000 above what it would be without the order,
the contribution margin per unit included with the special order must be $2 per unit more ($2 × 30,000 units =
$60,000) than the normal contribution margin. The normal contribution margin is the sales price, $28, less
all variable costs [
+ (2/3 x
], or $12. Thus, the selling price of the
special order must cover the additional shipping costs, and still result in a contribution margin of
normal + $2 additional requirement). Therefore, a selling price of
is required.
< Req B1
Req B2>
Prev
1 of 4
Next >
23
國 2囚
NOV
17
étv
280
MacBook Air
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