Unit costs to manufacture and sell a calculator T9, Clark Company\'s main produc

ID: 2399021 • Letter: U

Question

Unit costs to manufacture and sell a calculator T9, Clark Company's main product, are as follows Direct Materials.... Direct Labor7.50 Variable ???. Fixed MOH..9 70 Variable Selling Costs..50 Fixed Administrative cost13.50 Total. $15.20 18.50 ....$70.90 Clark receives a special order for 1000 units of calculator T9 at a selling price of $60 per unit. Normal selling price is $80 per unit. Variable selling costs will be reduced TO $3.00 per unit. Clark Company has enough excess capacity to produce 900 units. What will be the effect on NOI if Clark accepts this special order (assume full order is satisfied)?

Explanation / Answer

Statement showing Incremental income on acceptance of order

1000 Units of T9

sales revenue

$ 60,000.00

Less: Variable costs

Direct material

$ 15,200.00

Direct Labor

$ 7,500.00

Variable Manufacturing Overheads

$ 18,500.00

Variable selling Cost

$ 3,000.00

Total Variable Cost

$ 44,200.00

Net Increase in Income

$ 15,800.00

Effect on Net Operating Income if Clark accepts this special order---

Increase in NOI by $ 15800.

Note: Fixed Manufacturing overheads and selling cost will not be considered because fixed cost remains the same up to the capacity of company.