vBlue 100 points Delta Compeny produces a single product. The cost of pr a singl
ID: 2593357 • Letter: V
Question
vBlue 100 points Delta Compeny produces a single product. The cost of pr a single unit of this product at the compeny's normel activity level of 103,200 units per year is and selling 2.00 Direct materials Direct labor Variable manufacturing Fixed Variable selling and Fixed selling and administrative s 1.00 2.00 overhead $ .50 4.85 manufacturing overhead s 2.00 administrative expenses The normal selling price is $23 per unit. The company s capacity is 129.600 units per year. An order has been received from a mail-order house for 2,200 units at a special price of $20.00 per unit. This order would not affect reguiar sales Required: 1. If the order is accepted, by how much will annual profts be increased or decreased? (The order will not change the company's total fixed costs.) Increase $16,830 2. Assume the company has 500 units of this product left over from last year that are inferior to the current model. The units must be sold through regular annels at reduced prices. What unit cost is relevant for establishing a minimum seling price for these units? (Round your answer to 2 decimal places vant costExplanation / Answer
1)
Normal selling price = 23 per unit
Total Variable cost per unit = 2 + 2 + 0.50 + 2 = 6.50
Unused capacity = 129600 - 103200 = 26400
Order received = 2200 units
If there is an unsed capacitty then order can be accepted at variable cost.
Increase in profit = (20-6.50)*2200 = 29700
2)
Minimum selling price = Cost per unit = 2+2+0.50+4.85+2+1 = 12.35
Unit cost relevant for minimum selling price is 12.35
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