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ID: 2512191 • Letter: M

Question

marks Tools Window Help Firefox File Edit View History Book ? csuF Portal . Harne ? studiert Services . Di × × TITANkum ??ezto.mheducation.com/hm.tpx Update Now Your Firetax is critically out of dete. An updste is requred to stay secure Delta Campany produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 99,600 units per year is: $ 1.50 $ 2.00 $ 70 S 4.45 Oirect materials Direct labor ariable manufacturing overhead Fixed manufacturing overheed Variable seling d administrative Variable selling and administrative expenses $ 1.90 Fixed selling and administrative expenses 1.00 The normal selling price is $20 per unit. The company's capacity is 129,600 units per year. An order has been received from a mail-order house for 2,500 units at a special price of $17.00 per unit. This arder would not afect regular sales. Required: 1. If the order is accepted, by how much will arnnual profits be increased or decreased? (The order will not change the company's total fixed costs. by Assume the company has 500 units of this product left over from last year that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units? (Round your answer to 2 decimal places.) 2. DC

Explanation / Answer

1) Solution: If the order is accepted, Annual Profits would?Increase by $34,750

Working:

Variable costs per unit:

Direct materials

1.5

Direct labour

Variable manufacturing overhead

0.7

Variable Selling and Administrative Expenses

1.9

Total Variable costs per unit:

6.1

Additional Contribution for 1700 units

Selling price per unit:

Less:Variable costs per unit:

6.1

Contribution per unit:

13.9

Contribution for 2500 units

34,750

2) Solution: $1.90