The Melrose Corporation produces a single product, Product C. Melrose has thecapacity to produce 70,000 units of Product C each year. If Melrose produces atcapacity, the per unit costs to produce and sell one unit of Product C are as follows:Direct materials.Direct labor...Variable manufacturing overhead.Fixed manufacturing overhead.Variable selling expense.Fixed selling expense..$20$17$13$14$12$8The regular selling price of one unit of Product C is $100. A special order has beenreceived by Melrose from Moore Corporation to purchase 7,000 units of Product Cduring the upcoming year. If this special order is accepted, the variable sellingexpense will be reduced by 75%. Total fixed manufacturing overhead and fixed sellingexpenses would be unaffected except that Melrose will need to purchase a specializedmachine to engrave the Moore name on each unit of product C in the special order.The machine will cost $10,500 and will have no use after the special order is filled.Assume that direct labor is a variable cost.Suppose Melrose can sell 68,000 units of Product C to regular customers next year. IfMoore Corporation offers to buy the special order units at $90 per unit, the effect ofaccepting the special order for 7,000 units on Melrose's net operating income for nextyear will be a:а.b.$58,500 increase$83,000 increase$93,500 increase$273,000 increaseС.d.

Relevant cost are the avoidable cost. A differential cost incurred pertaining to a particular…

Suppose Melrose can sell 68,000 units of Product C to regular customers next year. If Moore Corporation offers to buy the special order units at $90 per unit, the effect of accepting the special order for 7,000 units on Melrose's net operating income for next year will be a: $58,500 increase $83,000 increase $93,500 increase $273,000 increase а. b. С. d.

Suppose Melrose can sell 68,000 units of Product C to regular customers next year. If Moore Corporation offers to buy the special order units at $90 per unit, the effect of accepting the special order for 7,000 units on Melrose's net operating income for next year will be a: $58,500 increase $83,000 increase $93,500 increase $273,000 increase а. b. С. d.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The Melrose Corporation produces a single product, Product C. Melrose has the
capacity to produce 70,000 units of Product C each year. If Melrose produces at
capacity, the per unit costs to produce and sell one unit of Product C are as follows:
Direct materials.
Direct labor...
Variable manufacturing overhead.
Fixed manufacturing overhead.
Variable selling expense.
Fixed selling expense..
$20
$17
$13
$14
$12
$8
The regular selling price of one unit of Product C is $100. A special order has been
received by Melrose from Moore Corporation to purchase 7,000 units of Product C
during the upcoming year. If this special order is accepted, the variable selling
expense will be reduced by 75%. Total fixed manufacturing overhead and fixed selling
expenses would be unaffected except that Melrose will need to purchase a specialized
machine to engrave the Moore name on each unit of product C in the special order.
The machine will cost $10,500 and will have no use after the special order is filled.
Assume that direct labor is a variable cost.
Suppose Melrose can sell 68,000 units of Product C to regular customers next year. If
Moore Corporation offers to buy the special order units at $90 per unit, the effect of
accepting the special order for 7,000 units on Melrose's net operating income for next
year will be a:
а.
b.
$58,500 increase
$83,000 increase
$93,500 increase
$273,000 increase
С.
d.

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