shipped. BY HOW MUCH WILL PROFIT INCREASE/ DECREASE IF THE ORDER IS ACCEPTED?

Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
icon
Related questions
Question
Dexter Company has been approached by a new customer with an offer to purchase 1,400 units of
Dexter's product at a price of P3 each. The new customer is graphically separated from Dexter's
other customers, and there would be no effect on existing sales. Dexter normally produces 10,000
units but only plans to produce and sell 8,000 in the coming year. The normal sales price is P5 per
unit.
Unit cost information is as follows:
Direct materials
PO.75
Direct labor
0.80
Variable overhead
0.40
Fixed Overhead
2.00
Total
3.95
If Dexter accepts the order, no fixed manufacturing activities will be affected because there is
sufficient excess capacity. However, the distribution center at the warehouse is operating at full
capacity and would need to add capacity costing P1,000 for every 5,000 units to be packed and
shipped.
BY HOW MUCH WILL PROFIT INCREASE/ DECREASE IF THE ORDER IS ACCEPTED?
Transcribed Image Text:Dexter Company has been approached by a new customer with an offer to purchase 1,400 units of Dexter's product at a price of P3 each. The new customer is graphically separated from Dexter's other customers, and there would be no effect on existing sales. Dexter normally produces 10,000 units but only plans to produce and sell 8,000 in the coming year. The normal sales price is P5 per unit. Unit cost information is as follows: Direct materials PO.75 Direct labor 0.80 Variable overhead 0.40 Fixed Overhead 2.00 Total 3.95 If Dexter accepts the order, no fixed manufacturing activities will be affected because there is sufficient excess capacity. However, the distribution center at the warehouse is operating at full capacity and would need to add capacity costing P1,000 for every 5,000 units to be packed and shipped. BY HOW MUCH WILL PROFIT INCREASE/ DECREASE IF THE ORDER IS ACCEPTED?
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
Recommended textbooks for you
Understanding Business
Understanding Business
Management
ISBN:
9781259929434
Author:
William Nickels
Publisher:
McGraw-Hill Education
Management (14th Edition)
Management (14th Edition)
Management
ISBN:
9780134527604
Author:
Stephen P. Robbins, Mary A. Coulter
Publisher:
PEARSON
Spreadsheet Modeling & Decision Analysis: A Pract…
Spreadsheet Modeling & Decision Analysis: A Pract…
Management
ISBN:
9781305947412
Author:
Cliff Ragsdale
Publisher:
Cengage Learning
Management Information Systems: Managing The Digi…
Management Information Systems: Managing The Digi…
Management
ISBN:
9780135191798
Author:
Kenneth C. Laudon, Jane P. Laudon
Publisher:
PEARSON
Business Essentials (12th Edition) (What's New in…
Business Essentials (12th Edition) (What's New in…
Management
ISBN:
9780134728391
Author:
Ronald J. Ebert, Ricky W. Griffin
Publisher:
PEARSON
Fundamentals of Management (10th Edition)
Fundamentals of Management (10th Edition)
Management
ISBN:
9780134237473
Author:
Stephen P. Robbins, Mary A. Coulter, David A. De Cenzo
Publisher:
PEARSON