1 What is the financial advantage disadvantage of accepting

1) What is the financial advantage/ disadvantage of accepting the special order ?

2) As a separate matter from the special order, assume the company’s inventory includes 1,000 units of this product that were produced last year and 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 = ?

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 86,400 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses ?1.90 $3.00 $0.60 $ 3.45 $ 2.00 $ 2.00 The normal selling price is $23.00 per unit. The company\'s capacity is 99,600 units per year. An order has been received from a mail-order house for 1,100 units at a special price of $20.00 per unit. This order would not affect regular sales or the company\'s total fixed costs Required: 1. What is the financial advantage (disadvantage) of accepting the special order? 2. As a separate matter from the special order, assume the company\'s inventory includes 1,000 units of this product that were produced last year and 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order?

Solution

Per unit Total 1100 units Incremental revenue 20 22000 Incremental costs: Direct materials 1.9 2090 Direct labor 3 3300 Variable manufacturing overhead 0.6 660 Variable selling and administrative expenses 2 2200 Total Incremental costs 8250 Incremental net operating income(loss) 13750 Financial advantage $13750 2 Relevant cost per unit = Variable selling and administrative expenses = $2