Bixler Company has received a special order for Product YTZ at a selling price o

Question

Bixler Company has received a special order for Product YTZ at a selling price of $20 per unit. This order is over and above normal production, and budgeted production and sales targets for the year have already been exceeded. Capacity exists to satisfy the special order. No selling costs will be incurred in connection with this order. Unit costs to manufacture and sell Product YTZ are as follows: Direct materials, $7.85; direct labor, $3.90; variable manufacturing overhead, $9.15; fixed manufacturing costs, $4.85; variable selling costs, $2.85; and fixed general and administrative costs, $6.75. Should Bixler Company accept the order? Show solution using the total cost analysis approach.

Explanation / Answer

Answer: Costs to produce Special Order:

No,Bixler company should not accept the order because  its costs more to produce than the sales price offered.Fixed manufacturing costs, variable selling costs and fixed general and administrative costs are not relevant.

Direct materials 7.85 Direct labor 3.9 Variable overhead 9.15 Total production cost/unit 20.9 vs. $20 sales price

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