Research Paper h Connect x Search Textbook k Solutior x Delta Company produce X

Question

Research Paper h Connect x Search Textbook k Solutior x Delta Company produce X × v Assignments: SP18: INT Secure | https://n Chapter 12 Homework Help Save& Exit Submit Saved my work Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 104,400 units per year is 2 points Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 2.10 $3.00 S 0.60 $ 5.15 $ 1.60 $ 2.00 eBook Hint Print The normal selling price is $24.00 per unit. The company's capacity is 127,200 units per year. An order has been received from a mail- order house for 1,900 units at a special price of $21.00 per unit. This order would not affect regular sales or the company's total fixed costs. References Required 1. What is the financial advantage (disadvantage) of accepting the special order? 2. As a separate matter from the special order, assume the company's inventory includes 1,000 units of this product that were produced last year and 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? Complete this question by entering your answers in the tabs below Required1 Required 2 Mc 9:53 AM O Type here to search @ ^ ? dx 4/23/2013

Explanation / Answer

Part 1

The financial advantage (disadvantage) is computed as follows

Financial advantage $26030

(The fixed costs are not relevant to the decision because they will be incurred regardless of whether the special order is accepted or rejected.)

Part 2

Relevant cost per unit = $1.60

(The relevant cost is $1.40 (the variable selling and administrative expenses). All other variable costs are sunk because the units have already been produced. The fixed costs are not relevant because they will not change in total as a consequence of the price charged for the left-over units.)

Per unit 1900 units Incremental sales 21.00 39900 Incremental costs: Direct materials 2.10 3990 Direct labor 3.00 5700 Variable manufacturing overhead 0.60 1140 Variable selling and administrative expenses 1.60 3040 Total incremental costs 7.30 13870 Financial advantage of accepting the special order 13.70 26030

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