Farrow Co. expects to sell 300,000 units of its product in the next period with

Question

Farrow Co. expects to sell 300,000 units of its product in the next period with the following results Sales (300,000 units) Costs and expenses $4,500,000 Direct materials Direct labor Overhead Selling expenses Administrative expenses 600,000 1,200,000 300,000 450,000 771,000 3,321,000 1,179,000 Total costs and expenses Net income The company has an opportunity to sell 30,000 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 16% and (2) administrative expenses would increase by $129,000 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 Costs and expenses Total costs and expenses Incremental income (loss) from new business

Explanation / Answer

Normal Volume Additional Volume Combined Total Sales 4500000 360000 4860000 Costs and expenses: Direct materials 6,00,000 60,000 660000 Direct labor 12,00,000 1,20,000 1320000 Overhead 3,00,000 3,48,000 648000 Selling expenses 4,50,000 0 450000 Administrative expenses 7,71,000 1,29,000 900000 Total costs and expenses 33,21,000 6,57,000 3978000 Incremental income (loss) from new business 11,79,000 -2,97,000 8,82,000

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

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