Special Order Total cost data follow for Greenfield Manufacturing Company, which

Question

Special Order
Total cost data follow for Greenfield Manufacturing Company, which has a normal capacity per period of 20,000 units of product that sell for $54 each. For the foreseeable future, regular sales volume should continue to equal normal capacity.

Notes:
1. Beyond normal capacity, fixed overhead costs increase $4,500 for each 1,000 units or fraction thereof until a maximum capacity of 24,000 units is reached.
2. Selling expenses consist of a 10% sales commission and shipping costs of $1 per unit. Greenfield pays only one-half of the regular sales commission rates on sales amounting to $3,000 or more.

Greenfield's sales manager has received a special order for 2,500 units from a large discount chain at a price of $44 each, F.O.B. factory. The controller's office has furnished the following additional cost data related to the special order:

1. Changes in the product's design will reduce direct material costs by $4 per unit.
2. Special processing will add 10% to the per-unit direct labor costs.
3. Variable overhead will continue at the same proportion of direct labor costs.
4. Other costs should not be affected.

a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.)

b. What is the lowest price Greenfield could receive and still make a profit of $5,000 before income taxes on the special order?

Round answer to two decimal places, if applicable.

$Answer

Direct material $270,800 Direct labor 204,000 Variable manufacturing overhead 156,000 Fixed manufacturing overhead (Note 1) 118,800 Selling expense (Note 2) 129,600 Administrative expense (fixed) 50,000 $929,200 QUESTION 6 Not complete Points out of 7.50 Flag question Special Order Total cost data follow for Greenfield Manufacturing Company, which has a normal capacity per periad of 20,000 units of product that soll for $54 oach. For the foreseeable future, regular sales volume should continue to equal normal capacity. Direct material Direct labor $270,800 204.000 156,000 Fixed manufacturing overhead (Note 1) 118,800 129,600 e manufacturing overhead expense (Notc 2) expense (foced) Notes: 1, Beyond normal capacity,fixed cverhead costs increase $4,500 for each 1,000 units or fraction thereof until a maxcimum capacity of 24,000 units is reached 2. Selling expenses consist o a 10% sales commission and shipping costs of $1 per unit. Greenfield pays only one-half of the regular sales commission rates on sales amounting to $3,000 or more. Greenfield's sales manager has received a special order for 2500 units from a large discount chain at a price of $44 each, F.O.B. factory, The controller's office has furnished the following additional cost data related to the special order 1, Changes in the product's design will reduce direct material costs by $4 per unit. 2. Special processing wil add 10% to the per-unit direct labor costs. 3. Variable overhead wil continue at the same proportion of direct labor costs 4. Other costs should not be affected a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.) Differential Analysis Per Unit Total Oifferential revenue Differential costs Direct material Direct labor ariable manufacturing overhead Seling Commission Shipping (F08. factory terms Total variable cost Contribution margin from special order Foxed cost increment: Extra cost Proft on special order b. What is the lowest price Greenfield could receive and stil make a profit of $5,000 before income taxes on the special order? Round answer to two decimal places, if applicable. Check

Explanation / Answer

Differenctial Analysis Per Unit Total Calculation Differential Revenue $44.00 $110,000.00 ($44*2500unit) Differencial Cost ($270800/20000)-$4 Direct Material $9.54 $23,850.00 Direct labour $11.22 $28,050.00 ($204000/20000)*1.10 Variable Manufacturing Overhead $8.58 $21,450.00 ($156000/20000*1.10) Selling Commission $2.20 $5,500.00 ($44*10%)/2 Shipping ( FOB Factory Name) $0.00 $0.00 Total Variable Cost $31.54 $78,850.00 Contribution Margin from Special Order $12.46 $31,150.00 Fixed Cost Increment Extra Cost $13,500.00 ($4500/1000*3000Unit) Profit on Special Order $17,650.00 Computation of Minimum Selling Price Per Unit Amount Direct Material $9.54 $23,850.00 Direct labour $11.22 $28,050.00 Variable Manufacturing Overhead $8.58 $21,450.00 Fixed Cost $13,500.00 Selling Comission $2.20 $5,500.00 Profit $5,000.00 Total Amount $97,350.00 Unit 2500 Selling Price Per unit $38.94

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