A customer has requested that Inga Corporation fill a special order for 2,000 un
ID: 2802118 • Letter: A
Question
A customer has requested that Inga Corporation fill a special order for 2,000 units of product for the special order, K8I for S12.50 a unit. While the product would be modified slightly o product K.8 I's normal unit product cost is $9.95 Direct materials $2.80 2.00 1.35 Direct Labor Fixed manufacturing overhead. Unit product cost Direct labor is a variable cost. I order would have no effect on the company's t pro The special fixed manufacturing overhead costs. The customer would like K8I that would increase the variable costs by $0.60 per uni investment of $5,000 in special molds that would have no salvage value. . This special order would have no effect on the company's other sales. The company has modifications made to and that would require an spare capacity for producing the special order. REQUIRED: Calculate the increase or decrease in company net operating income tha result if the special order were accepted.Explanation / Answer
Incremental revenue (2,000 units × $12.50 per unit).(A)...........$25,000
incremental costs:
Direct materials (2,000 units × $2.80 per unit)............................5,600
Direct labor (2,000 units × $2.00 per unit)...................................4,000
Variable manufacturing overhead
(2,000 units × ($1.35 per unit + $0.60 per unit))..........................3,900
Special molds................................................................................5,000
Total incremental cost...(B).........................................................18,500
Incremental net operating income(A-B)......................................$6,500
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