MC Qu. 73 Lattimer Company had the following results... Lattimer Company had the
ID: 2579313 • Letter: M
Question
MC Qu. 73 Lattimer Company had the following results... Lattimer Company had the following results of operations for the past year: 180,750 Sales (15,000 units at $12.05) Variable manufacturing costs Fixed manufacturing costs Selling and administrative expenses (all fixed) Operating income $98,250 21,750 36,750 (156, 750) 01 $ 24,000 A foreign company whose sales will not affect Lattimer's market offers to buy 5,100 units at S760 per unit In addition to existing costs, selling these units would add a additional business, the special order will yield a: port fees. Lattimer's annual production capacity is 25,000 units. If Lattimer accepts this Multiple Choice $5.355 profit Next >Explanation / Answer
Total Capacity = 25000 units
Used capacity = 15000 units
Unused capacity = 25000 - 15000 = 10000 units
Special order unit of 5100 is within unsed capacity of 10000 units. So, company can accept offer of special order if it is greater than total variable cost incurred.
Variable cost for special unit:
Variable maufacturing overhead = 98250/15000 = 6.55
Selling cost for export fees = 0.26
Total Variable cost for special unit: 6.55+0.26 = 6.81
Special offer price = 7.60
Special order yield = (7.60 - 6.81)*5100 = 0.79*5100 = 4029
Special order will yield $4,029 profit.
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