Glade Company produces a single product. The costs of producing and selling a si

Question

Glade Company produces a single product. The costs of producing and selling a single unit of this product at the company%u2019s current activity level of 8,200 units per month are:

The normal selling price is $17.55 per unit. The company%u2019s capacity is 10,700 units per month. An order has been received from a potential customer overseas for 2,500 units at a price of $12.30 per unit. This order would not affect regular sales.

If the order is accepted, by how much will monthly profits increase or decrease? (The order would not change the company%u2019s total fixed costs.) (Input the amount as a positive value.)

Assume the company has 500 units of this product left over from last year that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units? (Round your answer to 2 decimal places.)

Boyle%u2019s Home Center, a retailing company, has two departments, Bath and Kitchen. The company%u2019s most recent monthly contribution format income statement follows:

Department

A study indicates that $372,000 of the fixed expenses being charged to the Bath Department are sunk costs or allocated costs that will continue even if the Bath Department is dropped. In addition, the elimination of the Bath Department would result in a 17% decrease in the sales of the Kitchen Department.

If the Bath Department is dropped, what will be the effect on the net operating income of the company as a whole? (Input the amount as a positive value.)

Glade Company produces a single product. The costs of producing and selling a single unit of this product at the company%u2019s current activity level of 8,200 units per month are:

Explanation / Answer

Hi,

Please find the answers as follows;

Part A:

Monthly Profits would increase by 11500.

Part B:

Relevant Cost Per Unit = 1

Question 2:

Decrease in Net Operating Income by: 508250

Thanks.

Increase in revenue from special order 30750 Increase in cost related to special order
Direct materials 4250 Direct labor 10000 Variable manufacturing overhead 2500 Variable selling & administrative expenses 2500 Incremental cost 19250 Increased contribution margin from special order 11500

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