Pardo Company produces a single product and has capacity to produce 195,000 units per month. Costs to produce its current monthlysales of 156,000 units follow. The normal selling price of the product is $132 per unit. A new customer offers to purchase 39,000 unitsfor $61.20 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general andadministrative costs. The special offer would not affect its normal sales.Direct materialsDirect laborVariable overheadFixed overheadFixed general and administrativeTotals(a) Compute the income from the special offer.(b) Should the company accept the special offer?Required A Required BComplete this question by entering your answers in the tabs below.Variable costsPer Unit$ 12.5015.0010.0017.5013.00$ 68.00SPECIAL OFFER ANALYSISCompute the income for the special offer. (Round your "Per Unit" answers to 2 decimal places.)Contribution marginFixed costsCosts at 156,000UnitsFixed overheadFixed general and administrativeIncome$ 1,950,0002,340,0001,560,0002,730,0002,028,000$ 10,608,000Per Unit0.000.00 $Total0

Decision making relating to special orders is the process that helps the management in making the…

Answered: Pardo Company produces a single product…

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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Goshford Company produces a single product and has capacity to produce 100,000 units per month. Costs to produce its current sales of 80,000 units follow. The regular selling price of the product is $100 per unit. Management is approached by a new customer who wants to purchase 20,000 units of the product for $75.00 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead and no additional fixed selling and administrative expenses. The customer is not in the company’s regular selling territory, so there will be a $5.00 per unit shipping expense in addition to the regular variable selling and administrative expenses. Per Unit Costs at 80,000 Units Direct materials $ 12.50 $ 1,000,000 Direct labor 15.00 1,200,000 Variable manufacturing overhead 10.00 800,000 Fixed manufacturing overhead 17.50 1,400,000 Variable selling and administrative expenses 14.00 1,120,000 Fixed selling and…
Campbell Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 6,900 6,400 4,100 9,600 26,600 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Campbell for $2.80 each. Required a. Calculate the total relevant cost. Should Campbell continue to make the containers? b. Campbell could lease the space it currently uses in the manufacturing process. If leasing would produce $12,800 per month, calculate the total avoidable costs. Should Campbell continue to make the containers? a. Total relevant cost Should Campbell continue to make the containers? b. Total avoidable cost Should Campbell continue to make the containers?
Helix Company has been approached by a new customer to provide 3,200 units of its regular product at a special price of $8 per unit. The regular selling price of the product is $10 per unit. Helix is operating at 75% of its capacity of 11,200 units. Identify whether the following costs are relevant to Helix’s decision as to whether to accept the order at the special selling price. No additional fixed manufacturing overhead will be incurred because of this order. The only additional selling expense on this order will be a $0.50 per unit shipping cost. There will be no additional administrative expenses because of this order. Identify whether the cost is relevant or irrelevant to accepting this order.
Ross has received a special order for 10,000 units of its product at a special price of $15. The product normally sells for $22 and has the following manufacturing costs: Per unit Direct materials $ 6 Direct labor 4 Variable manufacturing overhead 3 Fixed manufacturing overhead 7 Unit cost $ 20 Assume that Ross has sufficient capacity to fill the order. If Ross accepts the order, what effect will the order have on the company’s short-term profit?
Falcon Co. produces a single product. Its normal selling price is $25 per unit. The variable costs are $16 per unit. Fixed costs are $20,200 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,620 units with a special price of $20 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $2 per unit would be eliminated. If the order is accepted, what would be the impact on net income? a.increase of $7,776 b.increase of $9,720 c.decrease of $5,832 d.increase of $12,636
Sheridan Company incurs a cost of $36 per unit, of which $20 is variable, to make a product that normally sells for $57. A foreign wholesaler offers to buy 7,000 units at $30 each. Sheridan will incur additional costs of $2 per unit to imprint a logo and to pay for shipping. Compute the increase or decrease in net income Sheridan will realize by accepting the special order, assuming Sheridan has sufficient excess operating capacity. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45)) Revenues Costs Net income $ $ Reject Sheridan company should LA $ LA Should Sheridan Company accept the special order? ✓the special order. Accept $ LA LA $ Net Income Increase (Decrease) A SUPP
Burns Industries currently manufactures and sells 30,000 power saws per month, although it has the capacity to produce 45,000 units per month. At the 30,000- unit-per-month level of production, the per-unit cost is $85, consisting of $50 in variable costs and $35 in fixed costs. Burns sells its saws to retail stores for $90 each. Allen Distributors has offered to purchase 6,000 saws per month at a reduced price. Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs. Burns decides to accept the special order for 6,000 units from Allen at a unit sales price that will add $120,000 per month to its operating income. The unit price Burns is charging Allen is: Multiple Choice $85. $50 $90. $70.
Eaton Tool Company has fixed costs of $435,600, sells its units for $94, and has variable costs of $50 per unit. a. Compute the break-even point. Break-even point b. Ms. Eaton comes up with a new plan to cut fixed costs to $340,000. However, more labor will now be required, which will increas variable costs per unit to $53. The sales price will remain at $94. What is the new break-even point? Note: Round your answer to the nearest whole number. New break-even point units Profitability will be less Profitability will be more units c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?
Falcon Co. produces a single product. Its normal selling price is $30 per unit. The variable costs are $19 per unit. Fixed costs are $25,000 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,500 units with a special price of $20 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $1 per unit would be eliminated.If the order is accepted, what would be the impact on net income? a.decrease of $750 b.increase of $3,000 c.increase of $1,500 d.decrease of $4,500
Lowwater Sailmakers manufactures sails for sailboats. The company has the capacity to produce 25,000 sails per year, but is currently producing and selling 20,.000 sails per year, The following information relates to current production. If a special sales order is accepted for 2,000 sails at a price of $87 per unit, and fixed costs increase by $20,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) Sale price per unit $150 Variable costs unit: per Manufacturing Marketing and administrative $60 $20 Total fixed costs: Manufacturing Marketing and administrative S600,000 $200 000 Increase by S14,000 Decrease by S4,000 ) Decrease by S14,000 ) Decrease by S6,000 () Increase by S6,000 ()
Goshford Company produces a single product and has capacity to produce 100,000 units per month. Costs to produce its current sales of 80,000 units follow. The regular selling price of the product is $100 per unit. Management is approached by a new customer who wants to purchase 20,000 units of the product for $75 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead and no additional fixed selling and administrative expenses. The customer is not in the company’sregular selling territory, so there will be a $5 per unit shipping expense in addition to the regular variable selling and administrative expenses. Determine whether management should accept or reject the new business.
Use the following information for the Quick Study below. (Algo) [The following information applies to the questions displayed below.] Helix Company is approached by a new customer to provide 1,800 units of its product at a special price of $9 per unit. The normal selling price of the product is $11 per unit. Helix is operating at 80% of its capacity of 11,500 units. No incremental fixed overhead will be incurred because of this order. Also, there will be no incremental fixed general and administrative costs because of this order. QS 23-2 (Algo) Special offer LO P7 a. Special selling price of $9.00 per unit b. Direct materials of $2.00 per unit c. Direct labor of $3.00 per unit d. Variable overhead of $2.50 per unit e. Fixed overhead of $.75 per unit f. Fixed general and administrative costs of $.60 per unit Based on income, should Helix accept this new customer order at the special price? Sales Variable costs SPECIAL OFFER ANALYSIS Direct materials Direct labor Variable overhead…

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