A customer has requested that Gamba Corporation ill a special order for 3,000 un

Question

A customer has requested that Gamba Corporation ill a special order for 3,000 units of product 041 for $30 a unit. While the product would be modifiledslighty for the special order, product Q41 normal unit product cost is $21.30 Direct materials Direct labor $ 5.40 6.00 2.50 740 overhead Fixed manufacturing overhead Unit product cost $2130 Direct labor is o variable cost. The special order r would have no effect on the company's total fixed manufacturing overhead costs. The customer would like made to product Q41 that would increase the variable costs by value. $100 per unit and that would require an investment of $14,000 in special molds that would have no salvage This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the accepted, the company's overall net operating income would increase (decrease) by special order. if the special order is O $(13,700) O $14.200 O $2.800) O $31.300

Explanation / Answer

1. option (D) $31300

Incremental revenue (3000 units ×$30 per unit) $90,000

Less incremental costs:

Direct materials (3000 units ×$5.4 per unit) 16200

Direct labor (3000 units × $6.00per unit) 18000

Variable manufacturing overhead 10500

(3000 unit × ($2.5 per unit +$1.00 per unit))

Special molds 14000

Total incremental cost 58700

Incremental net operating income 31300

2) Option (C) 32.7

Selling price per unit = 100.1

Variable cost (67.4)

(55.9 +8.7 + 1.2+1.6)

Contribution per unit 32.7

3) Option (D) 62,220

No. of minutes required = Monthly demand X Grinding minutes per unit

= 4200 x 4.00 + 4200 X 5.5 + 3200 X 4.5 +2200 X 3.6 = 62,220 minutes

4) option (C) UN,ZG,PW

UN ZG PW

Selling price per unit 307.93 514.82 508.85

Less: Variable cost per unit (196.21) (359.42) (351.42)

Contribution per unit (a) 117.72 155.4 157.43

Minutes onthe constraint (b) 4.9 8.4 9.1

Contribution margin per unit of constraint 24.02 18.5 17.3

(a/b)   

Ranking 1 2 3

5) option (b) yes, no, yes

Product X Product Y Product Z

Final sales value after further processing......... 28 28 33

Less sales value at split-off point......................... (20) (26) (22)

Incremental revenue from further processing..... 8 2 11

Less cost of further processing......................... (5) (7) (7)

Profit (loss) from further processing................. 3 (5) 4

Only Product X and Product Z should be processed beyond the split-off point.

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