Special Order A manufacturer of specialty components for farming equiptment, Khaing Hira, Inc. produces one of...

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Special Order A manufacturer of specialty components for farming equiptment, Khaing Hira, Inc. produces one of the components with the following full unit costs for 50,000 units: Direct materials Direct labor Manufacturing overhead (60% variable) Selling expenses (40% variable) Administrative expenses (10% variable) Total per unit $25 10 24 14 51 $78 Lishan Nour, Inc recently approached Khaing Hira with a special order to purchase 10,000 units for $60. Khaing Hira currently sells the models to dealers for $100. Capacity is sufficient to produce the extra 10,000 units. Variable selling expenses will be incurred on the special order. REQUIRED 1. Ignoring the special order, create a contribution margin income statement that shows the operating profit of the 50,000 units Khaing Hira currently sells. 2. Determine the impact on profit of accepting the order. Should Khaing Hira accept the special order? 3. Determine the minimum price Khaing Hira would need on the special order so that before tax profits for the company would increase by $205,000 (over their current profit calculated in #1). Special Order A manufacturer of specialty components for farming equiptment, Khaing Hira, Inc. produces one of the components with the following full unit costs for 50,000 units: Direct materials Direct labor Manufacturing overhead (60% variable) Selling expenses (40% variable) Administrative expenses (10% variable) Total per unit $25 10 24 14 51 $78 Lishan Nour, Inc recently approached Khaing Hira with a special order to purchase 10,000 units for $60. Khaing Hira currently sells the models to dealers for $100. Capacity is sufficient to produce the extra 10,000 units. Variable selling expenses will be incurred on the special order. REQUIRED 1. Ignoring the special order, create a contribution margin income statement that shows the operating profit of the 50,000 units Khaing Hira currently sells. 2. Determine the impact on profit of accepting the order. Should Khaing Hira accept the special order? 3. Determine the minimum price Khaing Hira would need on the special order so that before tax profits for the company would increase by $205,000 (over their current profit calculated in #1).

Answer rating: 100% (QA)

1 Contribution Margin Income Statement for 50000 units currently sold Total Sales Revenue 50000 unit... View the full answer