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 99,600 units per year is Direct materials Direct Labor Varlable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 2.38 $ 3.00 s 8.98 $ 4.45 S 1.28 s 2.80 The normal selling price is $2000 per unit The company's capacity Is 132.000 units per year. An order has been sales or the company's totai fixed costs Required m a mail-order house for 2 700 units at a special price of $1700 per unit. This order would not affect regular 1 What is the financial advantage (disadvantage) of accepting the special order? pecial order, assume the company's inventory includes 1,000 units of this product that t are inferior to the current model. The units must be sold through regular channels at were produced last year and that price for these units? Complete this question by entering your answers in the tabs below Required 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order? nandal advantage Required 2

Explanation / Answer

solution 1 Financial advantage Since, the fixed expense is already incurred by the company, and to produce new order, only variable expenses will be incurred. so, the financial advantage will be as under. Particulars per unit total Sale price 17 45900 Less: material 2.3 6210 Less: labour 3 8100 Less: variable oh 0.9 2430 Less: variable selling 1.2 3240 Advantage 25920 Solution 2 for the units which are in inventory and that r inferior, only we will consider variable cost which is as follows for minimum selling price: Particulars per unit material 2.3 labour 3 variable oh 0.9 variable selling 1.2 Total 7.4

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