4:37 PM ezto.mheducation.com Pad 2 10.00 points Delta Company produces a single

Question

4:37 PM ezto.mheducation.com Pad 2 10.00 points 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 98,400 units per year is Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses S 2.00 Fixed selling and administrative expenses S 3.00 S 1.70 S 4.00 S .70 S 3.85 The normal selling price is $24 per unit. The company's capacity is 120,000 units per year. An order has been received from a mail-order house for 1,800 units at a special price of $21.00 per unit. This order would not affect regular sales Required 1. If 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.) nnual 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 pice for these units? (Round your answer to 2 decimal places.) Relevant cost per unit References eBook & Resources

Explanation / Answer

1. Calculate profit increase (decrease)

b) Relevant cost per unit= 8.40 per unit

Direct material per unit 1.70 Direct labour per unit 4.00 Variable manufacturing overhead per unit 0.70 Variable selling and administrative exp per unit 2.00 Total relevant cost per unit 8.40 Sale per unit 21.00 Profit per unit 12.60 Unit 1800 Profit on special order 22680

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