Moing to andon-ill save this response Question 42 10 point Duck Call Company had

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Moing to andon-ill save this response Question 42 10 point Duck Call Company had the folloning results of operations for the past year Sales (10,000 units at 56.80) Materials and direct laber Overhead (40% vwiable) Selling and administrative expenses (all fied) Operating inoome 5 68,000 (20,000) (10,000) -600) Required A-Detemmine whether the company should accept the special order Support your answer with incremental (relevant) quanttative analysis B-List 2 qualitative factors the company should also consider when making this decision TTTAral

Explanation / Answer

Amount No. of units Per unit Sales revenue 68000 10000 6.8 Material and direct labor 20000 10000 2 Overheads 10000 10000 1 40% are variable Selling and admn. Exp. 6000 All fixed Operating Income 32000 Operating income per unit 3.2 REVISED FIGURES IN CASE OF ADDITIONAL ORDER IS ACCEPTED Amount No. of units Per unit Sales revenue          78,000              12,000 6.5 Exising revenue increased by revenue for 2000 units @ 5 each Material and direct labor          24,000              12,000 2 per unit $ 2 expense will be increased proportionately for additional 2000 units Overheads          10,800              12,000 0.9 60% being fixed, will remain unchanged but variable of 40% will be increased proportionately for 2000 units Selling and admn. Exp.            6,000 Being fixed, remain unchanged Shipping costs            1,200 Additional costs for shipping Operating Income      36,000 Operating income per unit 3 Although the operating income has increased but per unit operating income has decreased from $ 3.20 to $ 3 But there being spare capacity, we recommend to accept the order Additional sales will result in per unit lower fixed costs Per unit operating income has decresed because of shipping costs of $ 0.60 per unit and as a business, if these can be negotiated or reduced, it will add to operating income.

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