Exercise 13-9 (Algo) Special Order Decision [LO13-4] ces Delta Company produces a single product. The cost...

Transcribed Image Text:

Exercise 13-9 (Algo) Special Order Decision [LO13-4] ces Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 103,200 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 2.40 $ 3.00 $ 0.70 $ 4.15 $ 1.50 $ 2.00 The normal selling price is $25.00 per unit. The company's capacity is 138,000 units per year. An order has been received from a mail- order house for 2,900 units at a special price of $22.00 per unit. This order would not affect regular sales or total fixed costs. Required: 1. What is the financial advantage (disadvantage) of accepting the special order? 2. As a separate matter from the special order, assume the company's inventory includes 1,000 units that are inferior quality. The units must be sold through regular channels at a reduced price. The company does not expect the selling of these inferior units to affect regular sales. What unit cost is relevant for establishing a minimum selling price for the inferior units? Exercise 13-9 (Algo) Special Order Decision [LO13-4] ces Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 103,200 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 2.40 $ 3.00 $ 0.70 $ 4.15 $ 1.50 $ 2.00 The normal selling price is $25.00 per unit. The company's capacity is 138,000 units per year. An order has been received from a mail- order house for 2,900 units at a special price of $22.00 per unit. This order would not affect regular sales or total fixed costs. Required: 1. What is the financial advantage (disadvantage) of accepting the special order? 2. As a separate matter from the special order, assume the company's inventory includes 1,000 units that are inferior quality. The units must be sold through regular channels at a reduced price. The company does not expect the selling of these inferior units to affect regular sales. What unit cost is relevant for establishing a minimum selling price for the inferior units?

Answer rating: 100% (QA)

To analyze the special order decision and establish a minimum selling price for the inferior units l... View the full answer