Easy-peasy Co. has an offer for a special order of 100,000 units at a unit price...

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Easy-peasy Co. has an offer for a special order of 100,000 units at a unit price of P6. The present production of 425,000 units is 85% of capacity. Fixed factory overhead is P1,250,000 at 100% capacity. The following are gathered from operations: Materials, P1.80; Direct labor, P1.40; Variable overhead per unit, P0.50; Variable marketing expense, P0.50; Fixed general and administrative expenses, P800,000. It is expected that the company will incur an additional lease cost for additional equipment required for the special order, P10,000. The accountant estimated that the order will result as follows: Revenue Differential cost of goods sold Direct materials Direct labor Variable FOH Fixed FOH 180,000.00 140,000.00 50,000.00 250,000.00 Loss Less: Variable marketing expenses Loss on this order 600,000.00 620,000.00 (20,000.00) 50,000.00 (70,000.00) Recompute the effect of the order and make a recommendation to management. Indicate the better alternative in CAPITAL LETTERS and its net advantage, ex: ACCEPT 123456 or REJECT 123456. Easy-peasy Co. has an offer for a special order of 100,000 units at a unit price of P6. The present production of 425,000 units is 85% of capacity. Fixed factory overhead is P1,250,000 at 100% capacity. The following are gathered from operations: Materials, P1.80; Direct labor, P1.40; Variable overhead per unit, P0.50; Variable marketing expense, P0.50; Fixed general and administrative expenses, P800,000. It is expected that the company will incur an additional lease cost for additional equipment required for the special order, P10,000. The accountant estimated that the order will result as follows: Revenue Differential cost of goods sold Direct materials Direct labor Variable FOH Fixed FOH 180,000.00 140,000.00 50,000.00 250,000.00 Loss Less: Variable marketing expenses Loss on this order 600,000.00 620,000.00 (20,000.00) 50,000.00 (70,000.00) Recompute the effect of the order and make a recommendation to management. Indicate the better alternative in CAPITAL LETTERS and its net advantage, ex: ACCEPT 123456 or REJECT 123456.

Answer rating: 100% (QA)

Analyze the effect of the special order and make a recommendation Current Situation Production 42500... View the full answer