sicc cengac Check My Work 23-4 Special Order Decision Antiquities, Inc., produce
ID: 2575455 • Letter: S
Question
sicc cengac Check My Work 23-4 Special Order Decision Antiquities, Inc., produces antique-looking books. Management has just recelived a request for a special order for 2,000 books and must decide whether to accept it. Venus Company, the purchaser, is offering to pay $22.00 per book, which includes $3.00 per book for shipping costs. The variable production costs per book include $9.20 for direct materials, s4.00 for direct labor and S 3.80 for variable overhead. The current year's production 22,000 books and maximum capacity is 25,000 books. Fixed costs, including overhead, advertising, and selling and administrative costs, total $80,000. The usual selling price is $25.00 per book. Shipping costs, which are additional, average $3.00 per book. Compute the contribution margin per book for the special order. Hide CheckMyworkFeedbackExplanation / Answer
Unused capacity = 25000 - 22000 = 3000
Total demand for special order = 2000 books
pecial order is within unused capacity, so, offer should be accepted if offer price is greater than total variable cost.
Offered price = 22 per book
Calculation of variable cost:
Direct Materials = 9.20
Direct labour = 4
Variable overhead = 3.80
Total variable cost = 17
Contribution margin per book for special order = 22 - 17 = 5
Antiquities should accept the special offer.
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