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 91,200 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $1.80 $3.00 $0.80 $4.05 $1.60 2.00 The normal selling price is $18.00 per unit. The company's capacity is 126,000 units per year. An order has been received from a mail- order house for 2,900 units at a special price of $15.00 per unit. This order would not affect regular sales or the company's total fixed costs Required: 1. What is the financial advantage (disadvantage) of accepting the special order? 2. As a separate matter from the special order, assume the company's inventory includes 1,000 units of this product that were produced last year and 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? Complete this question by entering your answers in the tabs below Required 1Required 2 What is the financial advantage (disadvantage) of accepting the special order? Financial advantagee

Explanation / Answer

1 Per unit Total Incremental revenue 15 43500 Costs: Direct materials 1.8 5220 Direct labor 3 8700 Variable manufacturing overhead 0.8 2320 Variable selling and administrative expenses 1.6 4640 Total cost 20880 Incremental income 22620 Financial advantage=$22620 2 Relevant cost per unit=Variable selling and administrative expenses=$1.60

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