Koho Ltd. produces handheld portable televisions. The normal selling price is $400 and its unit production...

 

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Koho Ltd. produces handheld portable televisions. The normal selling price is $400 and its unit production cost is $264 as detailed below: Direct Materials Direct labour Manufacturing overhead $143 $ 86 $ 35 80% of the manufacturing overhead is fixed, with the remaining 20% being variable. The company's annual capacity is 10,000 units and they are currently operating at 95% of capacity. It historically sells all that it produces. The company has been approached by a customer, located outside Koho's normal market, who wants to make a one-time purchase of 2,000 custom televisions at $350 per television. There will be no change to the unit direct material cost; however, a special process will add an additional $6 per television to direct labour. In order to make this special order, Koho will have to buy a specialized piece of equipment for $2,000. This equipment will have no use after the special order is completed. REQUIRED: 1. Should Koho accept the order? Show the total effect on income if this order is accepted. (Show all Calculations.) 2. Identify two qualitative factors that should be considered before accepting a special order. Koho Ltd. produces handheld portable televisions. The normal selling price is $400 and its unit production cost is $264 as detailed below: Direct Materials Direct labour Manufacturing overhead $143 $ 86 $ 35 80% of the manufacturing overhead is fixed, with the remaining 20% being variable. The company's annual capacity is 10,000 units and they are currently operating at 95% of capacity. It historically sells all that it produces. The company has been approached by a customer, located outside Koho's normal market, who wants to make a one-time purchase of 2,000 custom televisions at $350 per television. There will be no change to the unit direct material cost; however, a special process will add an additional $6 per television to direct labour. In order to make this special order, Koho will have to buy a specialized piece of equipment for $2,000. This equipment will have no use after the special order is completed. REQUIRED: 1. Should Koho accept the order? Show the total effect on income if this order is accepted. (Show all Calculations.) 2. Identify two qualitative factors that should be considered before accepting a special order.

Answer rating: 100% (QA)

Calculation of variable cost per unit and decision whether to accept s... View the full answer