Special Order Manufacturing Company, which has a normal capacity per period of 2

Question

Special Order Manufacturing Company, which has a normal capacity per period of 20,000 units of product that sell for $54 each. For the foreseeable future, regular sales volume should continue to equal normal capacity $268,800 202,000 154,000 Direct material Direct labor Variable manufacturing overhead Fixed manufacturing overhead (Note 1) Selling expense (Note 2) Administrative expense (fxed) 129,600 50,000 923,200 Notes: 1. Beyond normal capacity,fkxed overhead costs increase $4.500 for each 1,000 units or fraction thereof until a maximum capacity of 24.000units is reached 2. Selling expenses consist of a 10% sales commission and shipping costs of $1 per unit. Greenheld pays only one-half of the regular sales commission rates on sales amounting to $3,000 or more Greenfield's sales manager has received a special order for 2.,500 units from a large discount chain at a price of $44 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 by $4 per unit 2. Special processing will add 10% to the per-unit direct labor costs. 3 Variable overhead will continue at the same proportion of direct labor costs. 4 Other costs should not be affected

Explanation / Answer

Direct material cost (regular) = 268800/20000=13.44 .cost for specialoffer = 13.44-4 = 9.44

Direct labor cost (regular) = 202000/20000=10.1.cost of special offer = 10.1 (1+.10)= 11.11

variable manufacturing overhead = 154000/20000=7.7 .cost of special offer = 7.7 (1+.1) = 8.47

**fixed cost is $ 4500 per 1000or fraction so at 2500 volume = it is 4500*3 = 13500

2)Total sales required = Total cost +profit desired

       = [80550+13500]+5000

        = 99050

price to charge = 99050 / 2500 = $ 39.62 per unit

Differential revenue 110000      [2500*44] Differential cost Direct material 9.44 Direct labor 11.11 variable manufacturing overhead 8.47 selling commission [44*.10*1/2] 2.2 shipping 1 Total variable cost 32.22 (80550)      [2500*32.22] contribution margin 29450 Fixed dcost increment extra cost (13500)                  profit on special order 15950

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

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