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Required: Determine the effect on the company's total net operating income of accepting the special order.

Required: Determine the effect on the company's total net operating income of accepting 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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Edalyn Corporation has received a request for a special order of 9,700 units of product Amity for $47.60 each. The normal selling price of this product is $52.70 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product Amity is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $18.40 7.70 4.90 7.80 $38.00 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product Amity that would increase the variable costs by $7.30 per unit and that would require a one-time investment of $47,100 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required: Determine the effect on the company's total net operating income of accepting the special order.
Transcribed Image Text:Edalyn Corporation has received a request for a special order of 9,700 units of product Amity for $47.60 each. The normal selling price of this product is $52.70 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product Amity is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $18.40 7.70 4.90 7.80 $38.00 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product Amity that would increase the variable costs by $7.30 per unit and that would require a one-time investment of $47,100 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required: Determine the effect on the company's total net operating income of accepting the special order.
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