Sherman Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a...

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Sherman Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 7,000 units of one of its most popular products. Sherman currently manufactures 25,000 units of this product in its Rockland, Utah, plant. The plant is operating at 50% capacity. The company incurs no variable marketing costs. The sales manager of Sherman wants to set the bid at $16.50 because she is sure that Sherman will get the business at that price. Others on the executive committee of the firm object, saying that Sherman would lose money on the special order at that price.(11 pts) Unit cost Unit cost Units 25,000 32.000 Manufacturing costs: Direct Materials $212,500 $8.50 $272,000 $8.50 Direct labor 106,250 4.25 136,000 4.25 Variable Factory overhead 68,750 2.75 88,000 2.75 Fixed Factory overhead 125,000 5.00 125,000 3.91 Total manufacturing costs 512.500 20.50 621,000 19.41 Marketing costs 75,000 3.00 75,000 2.34 Total Costs $587,500 $696,000 Unit cost $23.50 $21.75 Required 1. What is the relevant cost per unit? What would be the impact on short-term operating income if the order is accepted at the price recommended by the sales manager? 2. What would be the total opportunity cost of accepting the special order, if the company lost sales of 4,000 units to its regular customers? Assume the preceding facts and a normal selling price of $28 per unit. Sherman Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 7,000 units of one of its most popular products. Sherman currently manufactures 25,000 units of this product in its Rockland, Utah, plant. The plant is operating at 50% capacity. The company incurs no variable marketing costs. The sales manager of Sherman wants to set the bid at $16.50 because she is sure that Sherman will get the business at that price. Others on the executive committee of the firm object, saying that Sherman would lose money on the special order at that price.(11 pts) Unit cost Unit cost Units 25,000 32.000 Manufacturing costs: Direct Materials $212,500 $8.50 $272,000 $8.50 Direct labor 106,250 4.25 136,000 4.25 Variable Factory overhead 68,750 2.75 88,000 2.75 Fixed Factory overhead 125,000 5.00 125,000 3.91 Total manufacturing costs 512.500 20.50 621,000 19.41 Marketing costs 75,000 3.00 75,000 2.34 Total Costs $587,500 $696,000 Unit cost $23.50 $21.75 Required 1. What is the relevant cost per unit? What would be the impact on short-term operating income if the order is accepted at the price recommended by the sales manager? 2. What would be the total opportunity cost of accepting the special order, if the company lost sales of 4,000 units to its regular customers? Assume the preceding facts and a normal selling price of $28 per unit.

Answer rating: 100% (QA)

Based on the imagethe relevant cost per unit to determine whether Sherman Industries should accept the special order is the variable cost per unitThis is because the fixed costs will be incurred regar... View the full answer