Homework SourseThe Minton Company has gathered the following information fo
The Minton Company has gathered the following information for a unit of its most popular product:
The above cost information is based on 4,200 units. A foreign distributor has offered to buy 1,200 units at a price of $18 per unit. This special order would not disturb regular sales. Variable shipping and other selling expenses would be an additional $1 per unit for the special order. If the special order is accepted, Minton\'s operating profits will increase by:
a. $1,200.
b. $1,920.
c. $2,400.
d. $4,800.
| Direct materials | $ | 8 | |
| Direct labor | 3 | ||
| Overhead (40% variable) | 5 | ||
| Cost to manufacture | 16 | ||
| Desired markup (50%) | 8 | ||
| Target selling price | $ | 24 | |
Solution
Calculate profit on special order :
so answer is d) $4800
| Sales (1200*18) | 21600 |
| Less: Cost | |
| Direct material (1200*8) | (9600) |
| Direct labour (1200*3) | (3600) |
| variable Overhead (1200*5*40%) | (2400) |
| Variable shipping and other selling exp (1200*1) | (1200) |
| Net profit from special order | 4800 |
