maufactures and sells 60000 widgets per year. Personall has production capacity
ID: 2546876 • Letter: M
Question
maufactures and sells 60000 widgets per year. Personall has production capacity of 80000 widgets. The oost of building and seling a widget is computed as follows (for fixed Personall Company costs, the per unit rate is based on the current sales and production leve Direct materials.$36 Direct labor $19 Foxed manufacturing overhead.$ Sales commission (vaniable selling).. selling costs) A new customer wants to place a one time order for 14000 widgets at $66.00 each. No commissions would Personali will need to pay a one-time fee of $10500 for a special license to do business in the customer's country apply to the special order. However, What is the reguar seliling price of one widget? By how much will Personali's Company's inoome change if I decides to acceet he specias it decides to accept the special order? Give me the amount with a negative sign finoome would decrease, Incut just the amount ir intermediuary corputations and frnal answers to the nearest penny, when needed) noome would increase Input O iincome wouid not change (Round any per unt amounts inExplanation / Answer
A. Regular Selling Price of one widget
= 150/100 * (Direct Material + Direct Labour + Variable Manufacturing overhead + Fixed Manufacturing overhead + Variable Sales Commission + Fixed Selling Expenses)
= 150/100 * ($ 36 + $ 19 + $ 5 + $ 7 + $ 1 + $ 3)
= 1.5 * $ 71
= $ 106.50 Sale Price per widget
B. Changes in the income if the special order taken up
= (No. of Widget * Special Sales Price) - No of Widget * ( (Direct Material + Direct Labour + Variable Manufacturing overhead) - Special License for the order
= (14,000 * $ 66) - (14,000 * ( $36 + $ 19 + $ 5) - $ 10,500
= $ 924,000 - $ 840,000 - $ 10,500
= $ 73,500 Income Increase by acepting Special Order.
For the Calculation of he cost of the good sold of special order the Fixed cost is ignor because same is calculated and absorbed as per the Units produced and sale i.e. 60,000 units an dthe special order is above that and with in the Manufacturing Capacity and NO commisiin is payable as per the instruction given in the question.
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