### Special Order Decision Analysis for Wehrs CorporationWehrs Corporation has received a request to fulfill a special order for 9,800 units of product K19, priced at $47.50 each. The current standard selling price for the product is $52.60. However, to meet the special requirements, the units will need some modifications. Below is the cost breakdown for product K19 under normal production conditions:#### Cost Breakdown:- **Direct Materials**: $18.30- **Direct Labor**: $7.60- **Variable Manufacturing Overhead**: $4.80- **Fixed Manufacturing Overhead**: $7.70- **Total Unit Product Cost**: $38.40#### Additional Considerations:- **Direct Labor**: This is a variable cost.- **Special Order Modifications**: The modifications required by the customer would increase variable costs by $7.20 per unit.- **Special Mold Investment**: A one-time investment of $47,000 is necessary for special molds, with no salvage value.- **Impact on Fixed Costs**: The special order will not affect the company’s total fixed manufacturing overhead costs.- **Capacity**: The company has sufficient spare capacity to accommodate the special order, ensuring no disruption to other sales.### Required Analysis:Assess the impact on the company's total net operating income if the special order is accepted. This evaluation involves considering the increased variable costs, the additional investment in molds, and the overall contribution to the operating income after fulfilling the order.

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Description: ### Special Order Decision Analysis for Wehrs CorporationWehrs Corporation has received a request to fulfill a special order for 9,800 units of product K19, priced at $47.50 each. The current standard selling price for the product is $52.60. However

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Wehrs Corporation has received a request for a special order of 9,800 units of product K19 for $47.50 each. The normal selling price of this product is $52.60 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product K19 is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $18.30 7.60 4.80 7.70 Unit product cost $38.40 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product K19 that would increase the variable costs by $7.20 per unit and that would require a one-time investment of $47,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required: Determine the effect on the company's total net operating income of accepting the special order.

Wehrs Corporation has received a request for a special order of 9,800 units of product K19 for $47.50 each. The normal selling price of this product is $52.60 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product K19 is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $18.30 7.60 4.80 7.70 Unit product cost $38.40 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product K19 that would increase the variable costs by $7.20 per unit and that would require a one-time investment of $47,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required: Determine the effect on the company's total net operating income of accepting the special order.

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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