Homework: Chapter 8 Score: 0.14 of 1 pt 1 of 4 (1 complete) ? S8-4 (similar to)

Question

Homework: Chapter 8 Score: 0.14 of 1 pt 1 of 4 (1 complete) ? S8-4 (similar to) Blended Products manufactures t-shirts. It has the following costs when its production level is 75,000 units (t-shirts) ?(Click the icon to view the costs.) What will happen to Blended's operating income if it accepts this special order? Data Table ?(Click the icon to view additional information.) Total costs for 75,000 units Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 255,000 15,000 67,500 90,000 427,500 Complete the following incremental analysis to determine the impact on Blended's operating income if it accepts this speci l other amou minus sign to indicate a decrease in contribution margin and/or operating income from the special order.) Total Order Per Unit7,500 units) Incremental Analysis of Special Sales Order Decision Revenue from special order Less v Direct materials Direct labor Variable manufacturing overhead Contribution margin Less: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special order Total manufacturing costs ariable expense associated with the order: Print Done More Info The company's relevant range extends to 87,500 units. Blended has received a special order for 7,500 t-shirts at a special price or $46,875 for the entire order. The special order t-shirt would use a fabric that is less expensive than the standard fabric used by Blended, which would allow Blended to save S0.35 per t-shirt in direct materials when manufacturing this special order. Blended has the excess capacity to manufacture this special order. Its total fixed costs will not be impacted by the special order Print Done

Explanation / Answer

Incremental analysis :

Per unit Total Revenue from special order 6.25 46875 Less: Variable expense associated with the order Direct material 1.19 8925 Direct labour 0.20 1500 Variable manufacturing overhead 0.90 6750 Contribution margin 3.96 29700 Less: Additional fixed expenses associated with the order 0 Increase (decrease) in operating income from the special order 29700

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