Special Order Total cost data follow for Glendale Manufacturing Company, which has a normal capacity per period of 8,000 units of product that sell for $60 each. For the foreseeable future, regular sales volume should continue to equal normal capacity. $100,800 62,400 46,800 38,400 35,200 15,000 Direct material Direct labor.. Variable manufacturing overhead. Fixed manufacturing overhead (Note 1). Selling expense (Note 2). . Administrative expense (fixed). $298,600 Votes: 1. Beyond normal capacity, fixed overhead costs increase $1,800 for each 500 units or fraction thereof until a maximum capacity of 10,000 units is reached. 2. Selling expenses consist of a 6% sales commission and shipping costs of 80 cents per unit. Glendale pays only three-fourths of the regular sales commission on sales totaling 501 to 1,000 units and only two-thirds the regular commission on sales totaling 1,000 units or more. Glendale's sales manager has received a special order for 1,200 units from a large discount chain at a price of $36 each, F.O.B. factory. The controller's office has furnished the following additional cost data related to the special order: 1. Changes in the product's design will reduce direct material costs $1.50 per unit. 2. Special processing will add 20% to the per-unit direct labor costs. 3. Variable overhead will continue at the same proportion of direct labor costs. 4. Other costs should not be affected.
Special Order Total cost data follow for Glendale Manufacturing Company, which has a normal capacity per period of 8,000 units of product that sell for $60 each. For the foreseeable future, regular sales volume should continue to equal normal capacity. $100,800 62,400 46,800 38,400 35,200 15,000 Direct material Direct labor.. Variable manufacturing overhead. Fixed manufacturing overhead (Note 1). Selling expense (Note 2). . Administrative expense (fixed). $298,600 Votes: 1. Beyond normal capacity, fixed overhead costs increase $1,800 for each 500 units or fraction thereof until a maximum capacity of 10,000 units is reached. 2. Selling expenses consist of a 6% sales commission and shipping costs of 80 cents per unit. Glendale pays only three-fourths of the regular sales commission on sales totaling 501 to 1,000 units and only two-thirds the regular commission on sales totaling 1,000 units or more. Glendale's sales manager has received a special order for 1,200 units from a large discount chain at a price of $36 each, F.O.B. factory. The controller's office has furnished the following additional cost data related to the special order: 1. Changes in the product's design will reduce direct material costs $1.50 per unit. 2. Special processing will add 20% to the per-unit direct labor costs. 3. Variable overhead will continue at the same proportion of direct labor costs. 4. Other costs should not be affected.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please help me figure a—c
Transcribed Image Text:## Required
**a.** Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.)
**b.** What is the lowest price Glendale could receive and still make a $3,600 profit before income taxes on the special order?
**c.** What general qualitative factors should Glendale consider?
Transcribed Image Text:**Special Order Cost Analysis for Glendale Manufacturing Company**
The following cost data pertains to the Glendale Manufacturing Company, which has a regular production capacity of 8,000 units per period. These units are sold at a price of $60 each. The company is expected to maintain this regular sales volume, equaling its normal capacity for the foreseeable future.
**Cost Breakdown:**
- **Direct Material**: $100,800
- **Direct Labor**: $62,400
- **Variable Manufacturing Overhead**: $46,800
- **Fixed Manufacturing Overhead**: $38,400
- **Selling Expense**: $35,200
- **Administrative Expense (Fixed)**: $15,000
**Total Costs**: $298,600
**Notes:**
1. **Fixed Overhead Costs**: These costs increase by $1,800 for every 500 units (or fraction thereof) produced beyond the normal capacity, up to a maximum of 10,000 units.
2. **Selling Expenses**: Composed of a 6% sales commission and shipping costs of 80 cents per unit. For sales between 501 and 1,000 units, Glendale pays 75% of the regular commission, and for sales of 1,000 units or more, only two-thirds of the regular commission is paid.
The sales manager at Glendale has received a special order for 1,200 units from a large discount chain, with a price of $36 each, F.O.B. factory. The controller’s office provided the following additional cost information for this special order:
1. **Direct Material Costs**: Due to design changes, the direct material costs will reduce by $1.50 per unit.
2. **Direct Labor Costs**: Special processing will increase the per-unit direct labor costs by 20%.
3. **Variable Overhead**: This will remain consistent with the proportion of direct labor costs.
4. **Other Costs**: These are expected to remain unaffected.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images
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.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education