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per nth and has received a special an international customer. internati custom lls the product to regular customers for $95 per unit. The company has excess capacity to produce the special order. T verhead 9.50 Fixed overhead 3.50 Fixed manufacturing overhead totals $35,000 per month. Management has detern Should the company accept the special order?

per nth and has received a special an international customer. internati custom lls the product to regular customers for $95 per unit. The company has excess capacity to produce the special order. T verhead 9.50 Fixed overhead 3.50 Fixed manufacturing overhead totals $35,000 per month. Management has detern Should the company accept the special order?

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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A company currently sells 6,000 units per month and has received a special order from an international customer. The international customer would like to purchase 1,500 units for a price of $80 per unit. The company currently sells the product to regular customers for $95 per unit. The company has excess capacity to produce the special order. The product unit cost is shown below. Direct Materials $49.50 Direct labor 16.50 Variable overhead 9.50 Fixed overhead 3.50 Fixed manufacturing overhead totals $35,000 per month. Management has determined that the additional shipping costs for the international delivery would be $4 per unit. Should the company accept the special order? Select one: a. Yes, because operating income will increase by $750. b. Yes, because operating income will increase by $6,750. c. No, because operating income will decrease by $21,000. d. No, because operating income will decrease by $4,500.
Transcribed Image Text:A company currently sells 6,000 units per month and has received a special order from an international customer. The international customer would like to purchase 1,500 units for a price of $80 per unit. The company currently sells the product to regular customers for $95 per unit. The company has excess capacity to produce the special order. The product unit cost is shown below. Direct Materials $49.50 Direct labor 16.50 Variable overhead 9.50 Fixed overhead 3.50 Fixed manufacturing overhead totals $35,000 per month. Management has determined that the additional shipping costs for the international delivery would be $4 per unit. Should the company accept the special order? Select one: a. Yes, because operating income will increase by $750. b. Yes, because operating income will increase by $6,750. c. No, because operating income will decrease by $21,000. d. No, because operating income will decrease by $4,500.
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