2) Ratzlaff Company has a curent production level of 20,000 units per month. Uni

Question

2) Ratzlaff Company has a curent production level of 20,000 units per month. Unit costs at this level are: Direct materials Direct labor Variable overhead Fixed overhead Marketing-fixed Marketing/distribution- variable S0.25 0.40 0.15 0.20 0.20 0.40 Current monthly sales are 18,000 units. Jim Company has contacted Ratzlaff Company about purchasing 1,500 units at $2.00 each. Current sales would NOT be affected by the one-time-only special order, and variable marketing/distribution costs would NOT be incurred on the special order. What is Ratzlaff Company's change in operating profits if the special order is accepted? (amount and indicate increase or decrease)

Explanation / Answer

Calculate change in operating income :

So Ratzlaff company's operating profit will increase by $1800

Incremental revenue (1500*2) 3000 Incremental cost Direct material (1500*0.25) (375) Direct labour (1500*.40) (600) Variable overhead (1500*.15) (225) Total incremental cost (1200) Incremental profit 1800

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

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