SixthZ currently produces and sells 1,200 treehouses per year and sells them at $1200 per treehouse. SixthZ has the capacity to produce 1,400 treehouses. SixthZ has received a special order from the families in Davis's Village Homes community. They would like to buy 135 treehouses at a price of $800 per treehouse. The product unit cost for the treehouses is shown below: Direct Materials $500 Direct Labor $300 Variable Overhead $40 Fixed Overhead $100 SixthZ incurs no variable selling and administrative expenses. Should SixthZ accept the special order?
SixthZ currently produces and sells 1,200 treehouses per year and sells them at $1200 per treehouse. SixthZ has the capacity to produce 1,400 treehouses. SixthZ has received a special order from the families in Davis's Village Homes community. They would like to buy 135 treehouses at a price of $800 per treehouse. The product unit cost for the treehouses is shown below: Direct Materials $500 Direct Labor $300 Variable Overhead $40 Fixed Overhead $100 SixthZ incurs no variable selling and administrative expenses. Should SixthZ accept the special order?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:SixthZ currently produces and sells 1,200 treehouses per year and sells them at $1200 per
treehouse. SixthZ has the capacity to produce 1,400 treehouses. SixthZ has received a special order
from the families in Davis's Village Homes community. They would like to buy 135 treehouses at a
price of $800 per treehouse. The product unit cost for the treehouses is shown below:
Direct Materials
$500
Direct Labor
$300
Variable Overhead
$40
Fixed Overhead
$100
SixthZ incurs no variable selling and administrative expenses. Should SixthZ accept the special
order?
O No, because accepting the order would result in a $113,400 decrease in operating income
O No, because accepting the order would result in a $18,900 decrease in operating income
O Yes, because accepting the order would result in a $54,000 increase in operating income
O No, because accepting the order would result in a $5,400 decrease in operating income
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