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 97,200 units per year is Direct materials Direct labor variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed 3elling and administrative expenses 2.00 4.00 0.60 3.85 f 1.90 3.00 The normal selling price is $20.00 per unit. The company's capacity is 112,800 units per year. An order has been received from a mail order house for 1.300 units at a special price of $1700 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 Required1Required 2 What is the financial advantage (disadvantage) of accepting the special order? inancial advantage

Explanation / Answer

Per unit 1300 units Incremental revenue 17 22100 Costs: Direct materials 2 2600 Direct labor 4 5200 Variable manufacturing overhead 0.6 780 Variable selling and administrative expenses 1.9 2470 Total costs 11050 Incremental income 11050 Financial advantage=$11050 2 Relevant cost=Variable selling and administrative expenses=$1.90

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