Zephram Corporation has a plant capacity of 200,000 units per month Unit costs a

Question

Zephram Corporation has a plant capacity of 200,000 units per month Unit costs at capacity are. Direct materials Direct labor Variable overhead Fixed overhead Marketing minus- fixed Marketing/distribution minus- variable Current monthly sales are 190,000 units at $30.00 each, Q, Inc, has contacted Zephram Corporation about 56 00 5.00 4.00 2.00 6.00 4.60 purchasing 2,500 units at $24.00 each. Current sales would not be affected by the special order. What is Zephram's change in operating profits if the oneminus-timeminus-only special order is accepted? oneminus-timeminus-only B. $11 000 increase

Explanation / Answer

Answer:-

Decision:- Hence Zephram corporatin should accept special order it will increase their profit from $11000, opreating profit will be after accpeting special order $467000.

Zephram corporation has a spare capacity of 10000 units (200000 units-190000 units).Hence only variable cost will be charged from special order.Hence relevant cost will be only variable cost.

Calculation of opreating profit (Current Level) Particulars Amount $ Sales (190000 units*$30 per unit) 5700000 Less:- Variable Costs Direct material (190000 units *$6 per unit) 1140000 Direct labor (190000 units *$5 per unit) 950000 Vaiable overhead (190000 units *$4 per unit) 760000 Marketing and distribution(190000 units*$4.60 per unit 874000 Contribution 1976000 Less:- Fixed costs Fixed overhead (190000 units *$2 per unit) 380000 Marketing and distribution(190000 units*$6.00 per unit 1140000 Opreating profit 456000

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