Farrow Co. expects to sell 150,000 units of its product in the next period with

Question

Farrow Co. expects to sell 150,000 units of its product in the next period with the following results Sales (150,000 units) Costs and expenses $2,250,000 Direct materials Direct labor Overhead Selling expenses Administrative expenses 300,000 600,000 150,000 225,000 385,500 1,660 50o $ 589,500 Total costs and expenses Net income The company has an opportunity to sell 15,000 additional units at $12 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units However, the additional volume would create the following incremental costs: (1) total overhead would increase by 15% and (2) administrative expenses would increase by $64,500 Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $12 per unit. Additional Volume Combined Total Normal Volume Sales 0 Costs and expenses 0 0 0 0 0 0 Total costs and expenses Incremental income (loss) from new business 0 S

Explanation / Answer

Normal Volume Additional Volume Combined Total Sales 2250000 180000 2430000 Costs and expenses: Direct materials 3,00,000 30,000 330000 Direct labor 6,00,000 60,000 660000 Overhead 1,50,000 22,500 172500 Selling expenses 2,25,000 225000 Administrative expenses 3,85,500 64,500 450000 Total costs and expenses 16,60,500 1,77,000 1837500 Incremental income (loss) from new business 5,89,500 3,000 592500 The company should accept the offer

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.