Delta Company produces a single product. The cost of producing and selling a sin

Question

Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 103,200 units per year is Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses $1.20 Fixed selling and administrative expenses 2.00 $1.80 3.00 $ .50 $ 3.95 The normal selling price is $24 per unit. The company's capacity is 133,200 units per year. An order has been received from a mail-order house for 2,500 units at a special price of $21.00 per unit. This order would not affect regular sales Required 1· lf the order is accepted, by how much will annual profits be increased or decreased? (The order will not change the company's total fixed costs.) nual profits would by 2. Assume the company has 500 units of this product left over from last year that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units? (Round your answer to 2 decimal places.) Relevant cost per unit

Explanation / Answer

Since multiple questions are posted, the first appearing full question is answered below, please post one question at a time.

Delta company problem:

1.Change in profits if increased or decreased.

Fixed costs are not relevant as they are not additionally incurred for special order.

Annual profits would INCREASE by $36,250.

2.Only variable selling and administrative expenses of $1.20 are relevant for establishing a minimum selling price for these units.

As far as inferior quality stock is concerned we need to consider only the addtional costs required to sell them as the remaining costs are already incurred and irrelevant.

Per Unit 2,500 units Incremental sales $21.00 $52,500 Incremental costs: Direct materials $1.80 $4,500 Direct labour $3.00 $7,500 Variable manufacturing over head $0.50 $1,250 Variable selling and administrative expenses $1.20 $3,000 Total incremental costs $6.50 $16,250 Incremental profits $14.50 $36,250

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