A customer has asked clougherty corporations to supply 4000units of product M97,
ID: 2359886 • Letter: A
Question
A customer has asked clougherty corporations to supply 4000units of product M97, with some modifications for $40.10 each. The normal selling price for this unit is $48.00 each. Thenormal unit product cost of prodcution M97 is computed is follow. Direct material $ 18.50, Direct labor is $ 1.20, variable manufacturing overhead is $ 8.40 fixed manufacturing overhead is $ 3.90, unit production is $ 32.00 Direct labor is a variable Determine the effect on the company's total net operating income of acceptong the special order. please show work for references.Explanation / Answer
Calculation of Variable Expenses
Direct Materials $18.50
Direct Labor $1.20
Variable Manufacturing Overhead $8.40
Extra Variable Expenses $5.70
Total Variable Costs $33.80
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Calculation of Product Margin Per Unit Sales Price $40.10
Less: Total Variable Costs $33.80
Product Margin Per Unit $6.30
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Calculation of the Effect on Net Operating Income Product Margin Per Unit $6.30
Number of Units in Special Order 4,000
Total Special Order Revenue $25,200
Less: Cost of Special Molds $31,000
Effect on Net Operating Income ($5,800)
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