value: 5.00 points Delta Company produces a single product. The cost of producin

Question

value: 5.00 points 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 106,800 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses $ 1.30 Fixed selling and administrative expenses $ 1.00 $2.50 $ 2.00 $ 50 $ 5.05 The normal selling price is $20 per unit. The company's capacity is 139,200 units per year. An order has been received from a mail-order house for 2,700 units at a special price of $17.00 per unit. This order would not affect regular sales. Required: 1. if the order is accepted, by how much will annual profits be increased or decreased? (The order will n change the company's total fixed costs.) Annual profits would by

Explanation / Answer

Requirement 1:

Increase in annual profits = 2,700 x Contribution Margin per Unit = 2,700 x $ ( 17.00 - 6.30) = $ 28,890.

Requirement 2 :

Annual profits would increase by $ 28,890

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