E. Boone Products had the following unit costs: Direct materials £24; Direct lab
ID: 2575401 • Letter: E
Question
E. Boone Products had the following unit costs: Direct materials £24; Direct labour £10; Variable factory overhead £8; Fixed factory overhead (allocated) £10. A one-time customer has offered to buy 3,000. Because of capacity constraints, 1,500 units will need to be produced during overtime. Overtime premium is £10 per unit. The additional profit (loss) that will be generated by accepting the special order isF. Boone Products had the following unit costs: Direct materials £24; Direct labour £10; Variable factory overhead £8; Fixed factory overhead (allocated) £18. A one-time customer has offered to buy 2,000 units at a special price of £48 per unit. Because of capacity constraints, 1,000 units will need to be produced during overtime. Overtime premium is £7 per unit. The additional profit (loss) that will be generated by accepting the special order is
G. Reggie Ltd. manufactures a single product with the following unit costs for 1,000 units: Direct materials £2,400; Direct labour £960; Factory overhead (30% variable) £1,800; Selling expenses (50% variable) £900; Administrative expenses (10% variable) £840; Total per unit £6,900. Recently, a company approached Reggie Ltd. about buying 100 units for £5,100 each. Currently, the models are sold to dealers for £7,800. Reggie Ltd.'s capacity is sufficient to produce the extra 100 units. No additional selling expenses would be incurred on the special order. If Reggie Ltd. wants to increase its profit by £20,000 on the special order, the minimum price it should charge per unit is
E. Boone Products had the following unit costs: Direct materials £24; Direct labour £10; Variable factory overhead £8; Fixed factory overhead (allocated) £10. A one-time customer has offered to buy 3,000. Because of capacity constraints, 1,500 units will need to be produced during overtime. Overtime premium is £10 per unit. The additional profit (loss) that will be generated by accepting the special order is
F. Boone Products had the following unit costs: Direct materials £24; Direct labour £10; Variable factory overhead £8; Fixed factory overhead (allocated) £18. A one-time customer has offered to buy 2,000 units at a special price of £48 per unit. Because of capacity constraints, 1,000 units will need to be produced during overtime. Overtime premium is £7 per unit. The additional profit (loss) that will be generated by accepting the special order is
G. Reggie Ltd. manufactures a single product with the following unit costs for 1,000 units: Direct materials £2,400; Direct labour £960; Factory overhead (30% variable) £1,800; Selling expenses (50% variable) £900; Administrative expenses (10% variable) £840; Total per unit £6,900. Recently, a company approached Reggie Ltd. about buying 100 units for £5,100 each. Currently, the models are sold to dealers for £7,800. Reggie Ltd.'s capacity is sufficient to produce the extra 100 units. No additional selling expenses would be incurred on the special order. If Reggie Ltd. wants to increase its profit by £20,000 on the special order, the minimum price it should charge per unit is
F. Boone Products had the following unit costs: Direct materials £24; Direct labour £10; Variable factory overhead £8; Fixed factory overhead (allocated) £18. A one-time customer has offered to buy 2,000 units at a special price of £48 per unit. Because of capacity constraints, 1,000 units will need to be produced during overtime. Overtime premium is £7 per unit. The additional profit (loss) that will be generated by accepting the special order is
G. Reggie Ltd. manufactures a single product with the following unit costs for 1,000 units: Direct materials £2,400; Direct labour £960; Factory overhead (30% variable) £1,800; Selling expenses (50% variable) £900; Administrative expenses (10% variable) £840; Total per unit £6,900. Recently, a company approached Reggie Ltd. about buying 100 units for £5,100 each. Currently, the models are sold to dealers for £7,800. Reggie Ltd.'s capacity is sufficient to produce the extra 100 units. No additional selling expenses would be incurred on the special order. If Reggie Ltd. wants to increase its profit by £20,000 on the special order, the minimum price it should charge per unit is
Explanation / Answer
Boone Products (in pounds) E.Special Order Direct material 24 24 Direct labour 10 10 Variable factory overhead 8 8 42 42 Add: Overtime premium 10 52 1500 x ( Special price - 52 ) 1500 x ( Special price - 42 ) Note special price not provided F.Special Order Direct material 24 24 Direct labour 10 10 Variable factory overhead 8 8 42 42 Add: Overtime premium 7 49 1000 x (48 - 49 ) -1000 1000 x ( 48 - 42 ) 6000 Profit on sale 5000 Reggie Ltd. G.Special Order Direct material 2400 2400 Direct labour 960 960 Variable factory overhead 1800*0.3 540 Admin variable 840*0.1 84 Total Cost per unit 3984 Less:Sales 5100 Profit per unit 1116 Total Profit 111600 Extra profit = 20000 /100 = 200 per unit New sale price = 5100 + 200 = 5300
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