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Pardo Company produces a single product and has capacity to produce 105,000 units per month. Costs to produce its current monthly sales of 84,000 units follow. The normal selling price of the product is $128 per unit. A new customer offers to purchase 21,000 units for $63.00 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales.

Pardo Company produces a single product and has capacity to produce 105,000 units per month. Costs to produce its current monthly sales of 84,000 units follow. The normal selling price of the product is $128 per unit. A new customer offers to purchase 21,000 units for $63.00 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales.

FINANCIAL ACCOUNTING
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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Pardo Company produces a single product and has capacity to produce 105,000 units per month. Costs to produce its current monthly sales of 84,000 units follow. The normal selling price of the product is $128 per unit. A new customer offers to purchase 21,000 units for $63.00 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales. Direct materials Direct labor Variable overhead Fixed overhead Fixed general and administrative Totals Per Unit $ 12.50 15.00 12.00 17.50 13.00 $ 70.00 (a) Compute the income from the special offer. (b) Should the company accept the special offer? Costs at 84,000 Units $ 1,050,000 1,260,000 1,008,000 1,470,000 1,092,000 $ 5,880,000
Transcribed Image Text:Pardo Company produces a single product and has capacity to produce 105,000 units per month. Costs to produce its current monthly sales of 84,000 units follow. The normal selling price of the product is $128 per unit. A new customer offers to purchase 21,000 units for $63.00 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales. Direct materials Direct labor Variable overhead Fixed overhead Fixed general and administrative Totals Per Unit $ 12.50 15.00 12.00 17.50 13.00 $ 70.00 (a) Compute the income from the special offer. (b) Should the company accept the special offer? Costs at 84,000 Units $ 1,050,000 1,260,000 1,008,000 1,470,000 1,092,000 $ 5,880,000
Note: Round your "Per Unit" answers to 2 decimal places. Variable costs SPECIAL OFFER ANALYSIS Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income $ Per Unit 0.00 0.00 $ Total 0
Transcribed Image Text:Note: Round your "Per Unit" answers to 2 decimal places. Variable costs SPECIAL OFFER ANALYSIS Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income $ Per Unit 0.00 0.00 $ Total 0
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