Wehrs Corporation has received a request for a special order of 9,400 units of p

Question

Wehrs Corporation has received a request for a special order of 9,400 units of product K19 for $46.30 each. The normal selling price of this product is $51.40 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product K19 is computed as follows:

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product K19 that would increase the variable costs by $6.00 per unit and that would require a one-time investment of $45,800 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.

Required:

Determine the effect on the company's total net operating income of accepting the special order.

Increase/Decrease and $ _________

Direct materials $ 17.10 Direct labor 6.40 Variable manufacturing overhead 3.60 Fixed manufacturing overhead 6.50 Unit product cost $ 33.60

Explanation / Answer

Incremental analysis :

Increase and $78280

Incremental revenue (9400*46.30) 435220 Incremental cost Direct material (9400*17.10) 160740 Direct labour (9400*6.40) 60160 Variable manufacturing overhead (9400*3.6) 33840 Additional cost (9400*6) 56400 Special molds 45800 Total incremental cost 356940 Incremental profit (loss) 78280

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.