Problem 10-143 [LO 4] Humes Corporation makes a range of products. The company\'

Question

Problem 10-143 [LO 4]

Humes Corporation makes a range of products. The company's predetermined overhead rate is $16 per direct labor-hour, which was calculated using the following budgeted data:

Management is considering a special order for 1,750 units of product J45K at $75 each. The normal selling price of product J45K is $86 and the unit product cost is determined as follows:

If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.

Humes Corporation makes a range of products. The company's predetermined overhead rate is $16 per direct labor-hour, which was calculated using the following budgeted data:

Explanation / Answer

Incremental Cost Direct Material per Unit 42 Direct Labour per unit 23 Variable Overhead (97500/32500) per unit 3 Total Incremental Cost per Unit 68 Sale price per additional unit 75 Profit Per Unit 7 Additional quantity for Special order 1750 Additional Incremental Profot            12,250 Then profit will increase by $ 12,250

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