Which of the following is relevant to the special order?
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Excercise 3.18
A company is considering a special order for 1,000 units to be priced at $8.90 (the normal price would be
$11.50). The order would require specialized materials costing $4.00 per unit. Direct labor and variable
factory overhead would cost $2.15 per unit. Fixed factory overhead is $1.20 per unit. However, the
company has excess capacity, and acceptance of the order would not raise total fixed factory overhead.
The warehouse, however, would have to add capacity costing $1,300. Which of the following is relevant
to the special order?
a. $11.50
b. $1.20
c. $7.35
d. $8.90
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- A company is considering a special order for 1,000 units to be priced at $8.90 (the normal pricewould be $11.50). The order would require specialized materials costing $4.00 per unit. Directlabor and variable factory overhead would cost $2.15 per unit. Fixed factory overhead is $1.20per unit. However, the company has excess capacity, and acceptance of the order would notraise total fixed factory overhead. The warehouse, however, would have to add capacity costing$1,300. Which of the following is relevant to the special order?a. $11.50b. $1.20c. $7.35d. $8.90Assume that 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 modifications made to product A90 that would increase the variable costs by $4.20 per unit and that would require an investment of $21,000 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. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be: Multiple Choice ($18.600) ($16,200) $30,000 $5,400Novak Corporation has the excess manufacturing capacity to fill a special order from Nash, Inc. Using Novak's normal costing process, variable costs of the special order would be $26,700 and fixed costs would be $37400. Of the fixed costs, $7.700 would be for unavoidable overhead costs, and the remainder for rent onaspecial machine needed to complete the order. What is the minimum price Novak should quote to Nash? Minimum price
- A customer has requested that Stanford Corporation fill a special order for 9,000 units of product S47 for $20.50 a unit. While the product would be modified slightly for the special order, product S47's normal unit product cost is $14.40: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost O $(9,900) Assume that 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 modifications made to product S47 that would increase the variable costs by $5.00 per unit and that would require an investment of $36,000 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. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be: O $4,500 S O $54,900 O…your corporation has received a request for a special order of 6,000 units of its products for $16 each. the product unit cost is as follows: (see attached image). the special order would have no effect on the company’s total fixed manufacturing overhead costs. of the special order is accepted, Variable selling cost would decrease by 60%. This special order would have no effect on the company’s other sales. The company has ample spare capacity for producing the special order. If the special order is excepted what is the impact on the companies overall net operating income?your corporation has received a request for a special order of 6000 units of its product for $16 each. The product unit cost is as follows:(see attached image). The special order would have no effect on the companies total fixed manufacturing overhead cost. If the special order is excepted variable selling cost would decrease by 60%. The special order would have no effect on the companies other sales. The company has ample spare capacity for producing the special order. If the special order is excepted, what is the impact on the companies overall net operating income? a) $13,920 b) $9,600 c) $16,080 d) $20,400
- The Comfy Company manufactures slippers and sells them at $11 a pair. Variable manufacturing cost is a $5 pair, and allocated fixed manufacturing cost is a $3 pair. It has enough idle capacity available to accept a one-time-only special order of 5000 pairs of slippers at $8 a pair. Comfy will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $15000 increase, (c) $25000 increase, or (d) $40000 increase? Show your calculations. The HoustonCompany manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 25,000units of Part No. 498 is as follows: Direct materials $4 Variable direct manufacturing labor 38 Variable manufacturing overhead 15 Fixed manufacturing overhead allocated 18 Total manufacturing cost per unit $75 The Cushion Company has offered to sell…ABC Company produces a product that currently sells for $72 per unit. Current production costs per unit include the following: Direct materials = $20 Direct labor = $24 Variable overhead = $10 Fixed overhead = $10. Product engineering has determined that a certain portion of the product conversion could be outsourced. Direct labor and variable overhead would be reduced by 50 percent. Raw material would not be affected and no other alternative use for any idle production capacity is apparent. The outsourcing supplier would charge ABC $15 to provide this product conversion. Identify the following relevant costs to process further: What is: Avoidable cost if outsourced = $ per unit Cost to buy = $ per unit Difference in conversion cost = $ per unit Decision to make or buy = (Make/Buy)Lakeside Inc. produces a product that currently sells for $82.80 per unit. Current production costs per unit include direct materials, $23; direct labor, $25; variable overhead, $11.50; and fixed overhead, $11.50. Product engineering has determined that a certain part of the product conversion process could be outsourced. Raw material costs would not be affected, but direct labor and variable overhead costs would be reduced by 30%. No other opportunity is currently feasible for unused production capacity. Required: a. What would be the net cost advantage or disadvantage if Lakeview decided to outsource part of the conversion process at a cost of $9.20 per unit? (Round your final answer to 2 decimal places.) b. Should Lakeside outsource part of the conversion process at a cost of $9.20 per unit? O Yes O No
- Pharoah Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Pharoah' market research department has recommended an introductory unit sales price of $28.00. The selling expenses are estimated to be $432,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. Capital-Intensive $4.00 per unit $5.00 per unit $3.00 per unit $2,284,000 Calculate the estimated break-even point in annual unit sales of the new product if Pharoah Company uses the: 1. Capital-intensive manufacturing method. Labor-intensive manufacturing method. 2. Labor-Intensive $4.50 per unit $7.00 per unit $4.00 per unit $1,437,000 Break-even point in units Capital-Intensive Labor-IntensiveLakeside Incorporated produces a product that currently sells for $46.80 per unit. Current production costs per unit include direct materials, $13; direct labor, $15; varlable overhead, $6.50; and fixed overhead, $6.50. Product engineering has determined that a certain part of the product conversion process could be outsourced. Raw material costs would not be affected, but direct labor and variable overhead costs would be reduced by 30%. No other opportunity is currently feasible for unused production capacity. Required: a. What would be the net cost advantage or disadvantage if Lakeview decided to outsource part of the conversion process at a cost of $5.20 per unit? Note: Do not round your Intermediate calculations. Round your final answer to 2 decimal places. b. Should Lakeside outsource part of the conversion process at a cost of $5.20 per unit? a. b. Should Lakeside outsource conversion process at this cost?ABC Company is introducing a new product. The managers are trying to decide whether to make one of its components or to buy it from an outside supplier. The space that could be used to make the part has no alternative use. The outside supplier will sell the part to ABC for P800 per unit. Following is an estimate of per-unit costs if ABC makes the part: Materials P225 ; Direct labor P250 ; Variable manufacturing overhead P225 ; Fixed manufacturing overhead P325. Fixed manufacturing overhead consists of depreciation on machinery and a share of the costs of the factory based on the floor space that manufacturing the part would occupy. Determine whether ABC should make or buy the part. Also you have to indicate the amount favoring the better alternative. please answer