Special Order Total cost data follow for Greenfield Manufact
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Special Order
Total cost data follow for Greenfield Manufacturing Company, which has a normal capacity per period of 20,000 units of product that sell for $54 each. For the foreseeable future, regular sales volume should
continue to equal normal capacity.
Direct material
Direct labor
$268,800
202,000
154,000
Variable manufacturing overhead
Fixed manufacturing overhead (Note 1) 118,800
Selling expense (Note 2)
129,600
Administrative expense (fixed)
50,000
$923,200
Notes:
1. Beyond normal capacity, fixed overhead costs increase $4,500 for each 1,000 units or fraction thereof until a maximum capacity of 24,000 units is reached.
2. Selling expenses consist of a 10% sales commission and shipping costs of $1 per unit. Greenfield pays only one-half of the regular sales commission rates on sales amounting to $3,000 or more.
Greenfield's sales manager has received a special order for 2,500 units from a large discount chain at a price of $44 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 by $4 per unit.
2. Special processing will add 10% 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.
a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.)
Transcribed Image Text:b. What is the lowest price Greenfield could receive and still make a profit of $5,000 before income taxes on the special order?
Round answer to two decimal places, if applicable.
$38.62
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