Delta Company produces a single product. The cost of producing and selling a sin

Question

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 92,400 units per year is:

The normal selling price is $24 per unit. The company’s capacity is 126,000 units per year. An order has been received from a mail-order house for 2,800 units at a special price of $21.00 per unit. This order would not affect regular sales.

If the order is accepted, by how much will annual profits be increased or decreased? (The order will not change the company’s total fixed costs.)

   Annual profits would INCREASE by (#)?

Assume the company has 500 units of this product left over from last year that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units? (Round your answer to 2 decimal places.)

Relevant cost per unit (#)?

PLEASE EXPLAIN HOW YOU GOT THE ANSWER. THANKS.

  Direct materials $ 2.30   Direct labor $ 2.00   Variable manufacturing overhead $ .80   Fixed manufacturing overhead $ 3.65   Variable selling and administrative expenses $ 1.40   Fixed selling and administrative expenses $ 1.00

Explanation / Answer

Per Unit Total 95200 (order accepted) 92400 units Selling price 24 2217600 2284800 Direct material 2.3 212520 218960 Direct labour 2 184800 190400 Variable Overheads 0.8 73920 76160 Fixed Manufacturing 3.65 337260 337260 Variable Selling & Admin 1.4 129360 133280 Fixed Selling 1 92400 92400 Net Profit 12.85 1187340 1236340 The profit will increase by $49,000 (1236340-1187340)

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

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