Ries Corporation has received a request for a special order of 8,200 units of pr

Question

Ries Corporation has received a request for a special order of 8,200 units of product R34 for $34.60 each. The normal selling price of this product is $36.20 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product R34 is computed as follows:


Direct materials $10.60
Direct labor 1.60
Variable manufacturing overhead 6.90
Fixed manufacturing overhead 2.90
Unit product cost 22.00


Direct labor is a variable cost. The special order would have no effect on the company

Explanation / Answer

Cost to produce 8200 units: Direcct materials: 10.60*8200 = 86,920 Direct labor: 1.60*8200 = 13,120 variable MOH: 6.90*8200 = 56,580 Increase in variable: 6.20*8200 = 50,840 special molds: 32000 total cost: 239,460 Revenue: 34.60*8200 = 283,720 incremental net income: 283,720 - 239,460 = 44,260 answer: $44,260

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