Ries Corporation has received a request for a special order of 8,000 units of pr

ID: 2389721 • Letter: R

Question

Ries Corporation has received a request for a special order of 8,000 units of product R34 for $34.60 each. The normal selling price of this product is $36.60 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 $10.80
Direct labor 2.00
Variable manufacturing overhead 6.80
Fixed manufacturing overhead 2.70
Unit product cost $22.30

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

Explanation / Answer

Revenue

34.60*8,000 =

276,800

Less expenses

Direct material

10.80*8,000 =

86,400

Direct labor

2.00*8,000 =

16,000

Variable MOH

12.60*8,000 =

100,800

Fixed MOH

Special mold

39,000

Total expenses

242,2000

Increase in income

34,600

Answer: Increase income by 34,600