ABC Co produces a single product. The cost of producing and selling one unit at the...
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ABC Co produces a single product. The cost of producing and selling one unit at the maximum capacity of 10,000 units per month is as follows: Direct Materials $50 Direct Labour $18 Total Manufacturing Overhead $70 Variable Selling Expense $17 Fored Selling Expense $25 The normal selling price is $150 per unit. Fixed manufacturing cost are $350,000 per month. Maximum capacity is 10,000 units per month and ABC Co. is currently producing at 8,000 units per month. A special order for 3,000 units paying $118 for each unit was received. It must be accepted or rejected in its entirety. The special order will require the same variable manufacturing costs as the regular product plus $7 extra materials. There will be no selling expense on the special order. Required: a) Based on financial consideration alone, should the special order be accepted or rejected? b) If the order is accepted, what is the impact on the company's overall profit? c) What is the minimum price per unit that ABC could accept for the special order? ABC Co produces a single product. The cost of producing and selling one unit at the maximum capacity of 10,000 units per month is as follows: Direct Materials $50 Direct Labour $18 Total Manufacturing Overhead $70 Variable Selling Expense $17 Fored Selling Expense $25 The normal selling price is $150 per unit. Fixed manufacturing cost are $350,000 per month. Maximum capacity is 10,000 units per month and ABC Co. is currently producing at 8,000 units per month. A special order for 3,000 units paying $118 for each unit was received. It must be accepted or rejected in its entirety. The special order will require the same variable manufacturing costs as the regular product plus $7 extra materials. There will be no selling expense on the special order. Required: a) Based on financial consideration alone, should the special order be accepted or rejected? b) If the order is accepted, what is the impact on the company's overall profit? c) What is the minimum price per unit that ABC could accept for the special order?
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a Should the Special Order be Accepted or Rejected To determine whether the special order should be ... View the full answer
Related Book For
Management Accounting
ISBN: 9780077185534
6th Edition
Authors: Will Seal, Carsten Rohde, Ray Garrison, Eric Noreen
Posted Date:
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