4. Wehrs Corporation hasreceived a request for a special order of 6,000 units of

Question

4.       Wehrs Corporation hasreceived a request for a special order of 6,000 units of produc k19for $32.30 each. The normal selling price of this product is $33.45each, but the units would need to be modified slightly for thecustomer. The normal unit product cost of product K19 is computedas follows.
Directmaterial…………………………………$15.00
Directlabor…………………………………………3.80
variable manufacturing overhead………1.40
Fixed manufacturingoverhead…………..2.10
unit productcost…………………………………22.30

Direct labor is a variable cost.The special order would have no effect on the company’s totalfixed manufacturing overhead costs. The customer would like somemodifications made to product K19 that would increase the variablecosts by $4.90 per unit and that would require a one-timeinvestment of $23,000 in special molds that would have no salvagevalue. This special order would have no effect on thecompany’s other sales. The company has ample spare capacityfor producing the special order.
Required:
Determine the effect on the company’s total net operatingincome of accepting the special order. Show your work

Explanation / Answer

Selling Price of K 32.30 Direct Material 15.00 Direct Labor 3.80 Variable Manufacturing 1.40 Overhead Unit Variable Cost 20.20 Increase in Variable Cost 4.90 New Unit Variable Cost 25.10 Number of Units Produced 6,000.00 Total Varible Cost 150,600.00 ( A ) ( 25.1 * 6000 ) Fixed Manufacturing Overhead ( 2.1 * 6000 + 23000 ) 35,600.00 ( B ) Total Cost 186,200.00 Total Sales 193,800.00 Operating Profit 7,600.00 Since , the economic life ofspecial mold is nowhere mentioned , the whole of it has been takenin evaluating the profitabilityof ProductK Selling Price of K 32.30 Direct Material 15.00 Direct Labor 3.80 Variable Manufacturing 1.40 Overhead Unit Variable Cost 20.20 Increase in Variable Cost 4.90 New Unit Variable Cost 25.10 Number of Units Produced 6,000.00 Total Varible Cost 150,600.00 ( A ) ( 25.1 * 6000 ) Fixed Manufacturing Overhead ( 2.1 * 6000 + 23000 ) 35,600.00 ( B ) Total Cost 186,200.00 Total Sales 193,800.00 Operating Profit 7,600.00

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.