Warranby Processing Number t Internet hprer Exam 4 Osto2 1

Warranby Processing Number ? t . Internet hp.rer Exam #4 (Osto2) 150 pts. De Jre 16.0 Help Save & Exit Submit TB MC Qu. 12-81 A customer has requested thet Lewelling Corporation. A customer has requested that Leweling Corporation l a special oeder for 2,500 unts of procuct $47 for $30 a unit While the peoduct would be modified slightly for the special order, product S47s normal unt product cost is $21 40 5 6.10 4,00 Variable manufacturing overhead 3.20 8.10 $21.40 40Direct labor Fixed nanufacturing overhead Unit product coat Assume that deect labor is a variable cost. The special order would have no effect on the company\'s total fxed manufacturg read costs The customer would ?0e modfeations made to product S47 e at would ncrease the variable costs by $1.70 per unit and that would require an investment of $15,000 00 in special molds that would have no salvage valoe. This special order wouid have no effect on the company\'s other sales The company has ample spare capacity for producing the special order. The annual financial advantage jdisadvantage) for the company as a resut of accepting this special order should be Mutiple Choice 55.200 $2.300

Solution

Answer is $ 22500 Explanation: Financial advantage/ (disadvantage) of accepting the special order: Incremental revenue (2500 units @30)) 75000 Less: Incremental cost Direct Material (2500*6.10) 15250 Direct Labour (2500*4) 10000 variable manufacturing Oh (2500*3.20) 8000 Additional variable cost (2500*1.70) 4250 Additional of special mould 15000 Net financial advantage 22500