Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs

Question

Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are: Direct materials Direct labor Variable overhead Fixed overhead Marketing fixed S6.00 5.00 4.00 2.00 6.00 4.60 Current monthly sales are 190,000 units at $30.00 each. Q, Inc., has contacted Zephram Corporation about purchasing 2,500 units at $24.00 each. Current sales would not be affected by the one-time-only special order. What is Zephrams change in operating profits if the one- time- only special order is accepted? OA. $49,000 increase OB. $22,500 increase OC. $11,000 increase O D. $31,500 increase

Explanation / Answer

ans)

1)Option (C) $11,000 increase

Sale price = 24

Less: Variable cost = (19.6)

(6+5+4+4.6)

Contribution 4.4

operating profit = 4.4 X 2500 = 11000 increase

2) Option (D) $150480

Finished goods = 6000

Total Materail cost = 301000

Direct material cost assigned to good units produced = 301000 /12000 X 6000= 150499.99 = 150500

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