Pardo Company produces a single product and has capacity to produce 145,000 units per month. Costs to produce its current monthly sales of 116,000 units follow. The normal selling price of the product is $144 per unit. A new customer offers to purchase 29,000 units for $66.60 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 Costs at 116,000 Per Unit $ 12.50 15.00 14.00 17.50 15.00 Units $1,450,000 1,740,000 1,624,000 2,030,000 1,740,000 $ 74.00 $ 8,584,000 Variable overhead Fixed overhead Fixed general and administrative Totals (a) Compute the income from the special offer. (b) Should the company accept the special offer?
Pardo Company produces a single product and has capacity to produce 145,000 units per month. Costs to produce its current monthly sales of 116,000 units follow. The normal selling price of the product is $144 per unit. A new customer offers to purchase 29,000 units for $66.60 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 Costs at 116,000 Per Unit $ 12.50 15.00 14.00 17.50 15.00 Units $1,450,000 1,740,000 1,624,000 2,030,000 1,740,000 $ 74.00 $ 8,584,000 Variable overhead Fixed overhead Fixed general and administrative Totals (a) Compute the income from the special offer. (b) Should the company accept the special offer?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Pardo Company produces a single product and has capacity to produce 145,000 units per month. Costs to produce its current monthly
sales of 116,000 units follow. The normal selling price of the product is $144 per unit. A new customer offers to purchase 29,000 units
for $66.60 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.
Costs at 116,000
Units
Direct materials
Direct labor
Per Unit
$ 12.50
$ 1,450,000
15.00
1,740,000
14.00
17.50
15.00
1,624,000
2,030,000
1,740,000
$ 74.00
$ 8,584,000
Variable overhead
Fixed overhead
Fixed general and administrative
Totals
(a) Compute the income from the special offer.
(b) Should the company accept the special offer?
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