Special o Total costa follow for Glendale Manufacturing Company, which has a nor

Question

Special o Total costa follow for Glendale Manufacturing Company, which has a normal capacity per period of 8,000 units of product that sell for $60 each. For the foreseeable future, regular sales volume should continue to equal normal capacity. Direct material Direct labor Variable manufacturing overhead Fixed manufacturing overhead (Note1) Selling expense (Note 2) $99,200 60,800 45,200 38,400 35,200 15,000 5293,800 Administrative expense (fixed) Notes: 1. Beyond normal capacity, fixed overhead costs increase $1.800 for each 500 units or fraction thereof until a maximum capacity of 10.000 units is reached 2. Selling expenses consist of a 6% sales commission and shipping costs of 80 cents per unit. Glendale pays only three-fourths of the regular sales commission on sales totaling 501 to 1,000 units and only two-thirds the regular commission on sales totaling 1,000 units or more Glendale's sales manager has received a special order for 1,200 units from a large discount chain ata price of $36 each. F.O.B, factory. The controller's office has furnished the following additional cost data related to the special order 1. Changes in the product's design will reduce direct material costs $1.50 per unit Special proce m112 f10 19 ? O/? ?- 0 8

Explanation / Answer

b.

Working:

Differential Analysis per unit Total selling price (1,200 x $36.00) $43,200 Direct material ($12.40 - $1.50) $10.90 Direct labor ($7.60 + 20% of $7.60) $9.12 Variable manufacturing overhead $6.75     (74% of direct labor) * Selling expenses       Sales commission $1.44         (2/3 of 6% of $36.00)     Shipping (FOB factory ) $0.80 Total variable costs $29.01 $34,811 Contribution Margin $8,389 Fixed Expenses Manufacturing overheads ($1,800 x 3) $5,400 Profit on special order $2,989 per unit Variable manufacturing overhead $5.65 Direct labor cost per unit $7.60 Variable manufacturing overhead as %    of direct labor * 74% Cost Details Total Per unit Direct Material 99200 $12.40 Direct Labor 60800 $7.60 Variable manufacturing ovenrehad 45200 $5.65 Fixed manufacturing overhead 38400 Selling Expense 35200 $4.40 Administrative expense 15000 Total Expenses 293800 Selling Expenses: Total Amount 35200 Sales commission (6% of 480,000) 28800 Shipping costs ($0.80 x 8,000) 6400 Total 35200

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