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 Variable manufacturing overhead $272,800 206,000 158,000 Fixed manufacturing overhead (Note 1) Selling expense (Note 2) 118,800 129,600 Administrative expense (fixed) 50,000 $935,200 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.) Differential revenue Differential costs Direct material Differential Analysis Per Unit Total $ 0 Direct labor Variable manufacturing overhead $ 0 0 0 Selling: Commission 0 Shipping (F.O.B. factory terms) 0 Total variable cost $ 0 0 Contribution margin from special order 0 Fixed cost increment: Extra cost Profit on special order $ 0 0 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. $ 0
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 Variable manufacturing overhead $272,800 206,000 158,000 Fixed manufacturing overhead (Note 1) Selling expense (Note 2) 118,800 129,600 Administrative expense (fixed) 50,000 $935,200 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.) Differential revenue Differential costs Direct material Differential Analysis Per Unit Total $ 0 Direct labor Variable manufacturing overhead $ 0 0 0 Selling: Commission 0 Shipping (F.O.B. factory terms) 0 Total variable cost $ 0 0 Contribution margin from special order 0 Fixed cost increment: Extra cost Profit on special order $ 0 0 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. $ 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
Variable manufacturing overhead
$272,800
206,000
158,000
Fixed manufacturing overhead (Note 1)
Selling expense (Note 2)
118,800
129,600
Administrative expense (fixed)
50,000
$935,200
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.)
Differential revenue
Differential costs
Direct material
Differential Analysis
Per Unit
Total
$
0
Direct labor
Variable manufacturing overhead
$
0
0
0
Selling:
Commission
0
Shipping (F.O.B. factory terms)
0
Total variable cost
$
0
0
Contribution margin from special order
0
Fixed cost increment:
Extra cost
Profit on special order
$
0
0
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.
$ 0
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