The price and cost data for one of Galaxy Ltd's standard product are as follows:Selling price64.0022.00Direct materialDirect labour6.00Total manufacturing overhead20.00Each unit requires 0.5 machine hours. Total manufacturing overhead is applied at a rate of$35 per machine hour. The fixed overhead component of this predetermined rate is based onbudgeted annual fixed overhead cost of $600,000 and planned production activity of 40,000machine hours spread evenly throughout the year.Galaxy Ltd received a special order for 16,100 units. The customer requested minormodification of the standard product and has asked for a lower price per unit due to bulkpurchasing, offering to pay $42 per unit. The modification will reduce the amount of directmaterial cost per unit by $2.50 but will require $8,700 in additional setup costs and specialequipment costing $75,000 to manufacture these units. The managers will allocate $5,000 ofexisting fixed administrative costs to this order.Required:Assume that present sales will not be affected. Should the order be accepted from a financialstandpoint? Support your answer with relevant costs and benefit analysis.

Answered: Image /qna-images/answer/11a2cdd6-a1c8-4d29-b677-341bde7ebb53.jpg

Answered: Required: Assume that present sales…

Required: Assume that present sales will not be affected. Should the order be accepted from a financial standpoint? Support your answer with relevant costs and benefit analysis.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Define opportunity costs and explain why they represent acommon source of error in making cost…

Q: Is

Q: How important is it to trace costs appropriately? Explain. As you are beginning to think about the…

A: Solution:- 1)Discussion of How important is it to trace costs appropriately as follows under:-…

Q: Match each of the following terms with the best definition. A. Theory of constraints B. Sunk cost…

A: Given the following question: Theory of constraints Sunk cost Differential analysis Opportunity…

Q: IBe the relevant costs in evaluating whether to accept an order at a special price. Provide an…

A: Managers must often evaluate whether a special order should be accepted, and if the order is…

Q: Is corrective action always necessary when actual costs are higher than standard costs

A: A company which manufactures products and goods keeps a sharp eye on its costs. When the actual cost…

Q: A typical planning decision would be described as: Select one: O A. Monitoring actual sales…

A: Typically planning is Process of making a detailed proposal for doing or achieving something. In…

Q: Which of the following best describes an "opportunity cost"? Expected future costs that differ…

A: Introduction: Opportunity cost: Cost for the opportunity lost called opportunity cost.

Q: Which method results in a more realistic amount for income because it matches the most current costs…

A: The current costs is based on the purchasing of the latest products which means the having book…

Q: List the most important assumptions of cost-volume-profit analysis.

A: Cost Volume Profit Analysis (CVP Analysis): This analysis is helpful in determining that how any…

Q: Besides the dollar cost, what other costs should you consider when comparing alternative solutions…

A: A company will incur various costs to earn revenue. The costs can be either direct or indirect costs…

Q: Decisions where relevant cost analysis might be used effective is Keep or replace decision. Explain…

A: Relevant costs are those costs that can be used while making a decision on whether to keep or…

Q: Which of the following statements about the financial risk to providers under different…

A: Risk is the most under capitation.Here's why the reason is:This is accurate that, regardless of…

Q: Match each of the statements to the correct stem. 1. In a make or buy decision,…

A: Make or buy decision is a decision of cost benefit…

Q: iable costs in the context of cost-volume-profit (CPV) analysis? b. Fixed costs in the context of…

A: Cost volume profit analysis is very important for the companies because it tells them that whether…

Q: Question 1 Peterman Inc. provides an automobile to Ms. Winters for her to use in carrying out her…

A: Common examples of taxable perks include gym memberships, transit passes, boarding, lodging,…

Q: What is a stand-alone principle and discuss the relevancy of financing cost under this principle.

A: In capital budgeting, the project evaluation and assessment is based on the criteria of project's…

Q: Determining the best approach to pricing requires a cost-benefit trade-off. Explain.

A: The best approach to pricing requires the cost benefit trade-off is explained as below, The Best…

Q: n a decision analysis situation, which one of the following costs is generally not relevant to the…

A: Decision making is the process used to choose one of the various available alternatives. Examples of…

Q: In making a short-term special decision, which of the following is MOST important? a. Use a…

A: Solution Concept The decision that is to be taken differs from one another on the basis of the time…

Q: Discuss the advantages and disadvantages of using a cost planning and control system based on earned…

A: A method for gauging project performance and advancement in terms of cost and schedule is earned…

Q: 1) Cost-volume relationship states that maximum profit is reached by maximizing revenue. Select one:

A: the correct option with adequate explanation are as follows

Q: The line that begins at the origin on a CVP graph represents total expenses. total fixed…

A: Since you have posted multiple questions , we will do the first one for you. If you want any…

Q: Selling price less estimated profit margin may be used to arrive at cost if this gives a reasonable…

A: The cost of the inventories which has been sold out by the company can be estimated and computed by…

Q: Identify at least two (2) irrelevant costs in a make vs buy decision

A: Irrelevant costs are those costs that do not change if any of the alternatives are selected between…

Q: em. b. the amount of money paid for an item,

A: Opportunity costs are the potential gains that an individual, investor, or corporation foregoes by…

Q: What is the benefit of identifying avoidable and unavoidable cost in decision making process?

A: Avoidable costs: Avoidable Costs, as the name suggests, are the costs that can be avoided of the…

Q: Beside the dollar cost, what other costs should you consider when comparing alternative solutions to…

A: There could be lot of factors which are to be considered while comparing alternative solutions to a…

Q: When making decisions, managers should consider a. revenues that differ between alternatives. b.…

A: The explanation for the given options: a. A manager on the verge of making decisions must consider…

Q: In incremental analysis, only relevant costs are considered when making a decision among…

A: These are the cost that are specific, pertinent and relevant to a particular decision making of…

Q: in which cases is it preferable to prepare the income statement based on marginal costing? Justify…

A: Income statement refers to the statement which is being prepared by the business in order to…

Q: Discuss the FOUR basic steps in benefit-cost analysis, which aspect of benefit-cost analysis would…

A: Cost-benefit analysis or CBA is referred to as the prices, which helps in measuring the benefits of…

Q: How should mixed costs be classified in cost, volume, and profit analysis?

A: Based on the cost behaviour costs are classified as fixed costs , variable costs and mixed costs.…

Q: Which investment return, expected or actual, does GAAP allow in the calculation of benefit cost?

A: Benefit cost: When an entity creates a benefit plan setting aside some moneys to meet future…

Q: Which of the following is not an application of cost-volume-profit analysis? Setting prices…

A: The objective of the question is to identify which of the given options is not an application of…

Q: What concept relates to the proportionate savings in costs gained when levels of production are…

A: Lets understand the meaning of all the terms given in the question. Accounting profit is a terms…

Q: Which of the following describes one aspect of incremental analysis? O Both costs and revenues that…

A: Once you have identified your goal, gathered information and evaluated the alternatives all you need…

Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

The price and cost data for one of Galaxy Ltd's standard product are as follows:
Selling price
64.00
22.00
Direct material
Direct labour
6.00
Total manufacturing overhead
20.00
Each unit requires 0.5 machine hours. Total manufacturing overhead is applied at a rate of
$35 per machine hour. The fixed overhead component of this predetermined rate is based on
budgeted annual fixed overhead cost of $600,000 and planned production activity of 40,000
machine hours spread evenly throughout the year.
Galaxy Ltd received a special order for 16,100 units. The customer requested minor
modification of the standard product and has asked for a lower price per unit due to bulk
purchasing, offering to pay $42 per unit. The modification will reduce the amount of direct
material cost per unit by $2.50 but will require $8,700 in additional setup costs and special
equipment costing $75,000 to manufacture these units. The managers will allocate $5,000 of
existing fixed administrative costs to this order.
Required:
Assume that present sales will not be affected. Should the order be accepted from a financial
standpoint? Support your answer with relevant costs and benefit analysis.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

use benefit-cost rate analysis method to solve
Profitability changes may be simply calculated by using what kind of tool: sales price/volume/variable costs/fixed costs.
Allocating costs for joint products can be done by: a. Sales Value Approach b. Contribution Margin Approach C. All Approaches are correct. d. Comparative Income Approach
To make predictions about costs and income, you must first classify costs by their behavior. True False
Describe the advantages and disadvantages of each type of sales alternative.
Can someone help by providing an example of revenues and costs that would be impacted by outsourcing decision using ration analysis?
The decision of whether to process products beyond the splitoff process should be based on which of the following? Select one: a. Production cost analysis b. Revenue analysis c. Incremental operating income attainable beyond the splitoff point d. Relevant cost analysis e. Gross margin analysis
Outline any problems you are aware of associated with the discounting of future costs and benefits in Cost Benefit Analysis.
Fixed costs, variable costs, and revenues are all included in profitability analysis? Select one: O True O False
Decisions where relevant cost analysis might be used effective is Sell or process decisions. Explain IN YOUR OWN WORDS what "sell or process decision" is AND MUST USE EXAMPLES IN YOUR DESCRIPTION.