Question
Multiple choice questions are located on MyBusinessCourse under Module 24 Jse the Excel Template on Blackfloard to complete the following problems Regal produces a single product. The company's March 2014 income tatement is as follows Sales (1,200 $120) Cost of goods sold Gross profit Selling and administrative Net income $144,000 $ 36,000 10,000 Regal's full manufacturing costs were as follows Direct materials (1,200 units x$20) Direct labor (1,200 units x $32) Variable manufacturing overhead [1,200 units x $ 24,000 38,400 21,600 Fixed manufacturing overhead Total Average cost per unit Selling and administrative expenses are all fixed. Regal just received a special order from a firm in Mexico to purchase 900 units at $80 each. The order will not affect the selling price to regular customers Required Use the template on BlackBoard (a) to determine Regal should accept the special order assuming Regal has excess capacity (b) to determine the net advantage or disadvantage lprofit increase or decreasel of accepting the order, assuming Regal does not have excess capacity. ote: If you don't like how the template is set up, please feel free to change it
Explanation / Answer
a. Relevant per unit cost for the offer = Total Variable cost = 20 + 32 + 18 = $70
Relevant per unit cost is less than the selling price of the offer. Thus, company should accept the offer. The offer will increase the profit by:
Additional Profit = (80-70)*900 = $9,000
b. Relevant per unit cost = Total variable cost + Contribution lost on the regular sales = 70 + (120 - 70) = $120 normal selling price of the company
