Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are: Direct materials $4.00 Direct labor 6.00 Variable overhead 3.00 Fixed overhead 1.00 Marketingfixed 7.00 Marketing/distributionvariable 3.60 Current monthly sales are 190,000 units at $30.00 each. Santo, Inc., has contacted Zephram Corporation about purchasing 20,000 units at $24.00 each. Assume that all of Zephram's costs would be at the same levels and rates as above. If Zephram accepts this offer, it will have to reject some regular business from regular customers so as not to exceed capacity. If they accept the special order, how much will operating income change?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are:
Direct materials $4.00
Direct labor 6.00
Variable
Fixed overhead 1.00
Marketingfixed 7.00
Marketing/distributionvariable 3.60
Current monthly sales are 190,000 units at $30.00 each. Santo, Inc., has contacted Zephram Corporation about purchasing 20,000 units at $24.00 each. Assume that all of Zephram's costs would be at the same levels and rates as above. If Zephram accepts this offer, it will have to reject some regular business from regular customers so as not to exceed capacity. If they accept the special order, how much will operating income change?
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