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Required: 1. Compute income from the special offer. 2. Should the company accept or reject the special offer?

Required: 1. Compute income from the special offer. 2. Should the company accept or reject the special offer?

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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JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement Per Unit $ 7.00 For Year Ended December 31 Sales (440,000 units) Variable costs Direct materials Direct labor Variable overhead Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income 1.48 0.52 0.70 4.30 0.30 0.25 $ 3.75 Required: 1. Compute income from the special offer. 2. Should the company accept or reject the special offer? A potential customer offers to buy 54,000 units for $3.70 each. These sales would not affect the company's sales through its normal channels. Details about the special offer follow. Contribution margin Annual Total $ 3,080,000 • Direct materials cost per unit and variable overhead cost per unit would not change. • Direct labor cost per unit would be $0.65 because the offer would require overtime pay. • Accepting the offer would require incremental fixed general and administrative costs of $5,400. • Accepting the offer would require no incremental fixed overhead costs. Fixed overhead Fixed general and administrative Income (loss) 651,200 228,800 308,000 1,892,000 132,000 110,000 $1,650,000 Complete this question by entering your answers in the tabs below. < Required 1 Required 1 Required 2 Compute income from the special offer. (Round your "Per Unit" answers to 2 decimal places.) Special Offer Analysis Per Unit Total Required 2 >
Transcribed Image Text:JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement Per Unit $ 7.00 For Year Ended December 31 Sales (440,000 units) Variable costs Direct materials Direct labor Variable overhead Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income 1.48 0.52 0.70 4.30 0.30 0.25 $ 3.75 Required: 1. Compute income from the special offer. 2. Should the company accept or reject the special offer? A potential customer offers to buy 54,000 units for $3.70 each. These sales would not affect the company's sales through its normal channels. Details about the special offer follow. Contribution margin Annual Total $ 3,080,000 • Direct materials cost per unit and variable overhead cost per unit would not change. • Direct labor cost per unit would be $0.65 because the offer would require overtime pay. • Accepting the offer would require incremental fixed general and administrative costs of $5,400. • Accepting the offer would require no incremental fixed overhead costs. Fixed overhead Fixed general and administrative Income (loss) 651,200 228,800 308,000 1,892,000 132,000 110,000 $1,650,000 Complete this question by entering your answers in the tabs below. < Required 1 Required 1 Required 2 Compute income from the special offer. (Round your "Per Unit" answers to 2 decimal places.) Special Offer Analysis Per Unit Total Required 2 >
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