Question

I am working on a Cost Accounting Demonstration Problem.

The first photo is the problem
The second photo is the answer and I am having trouble figuring out the starred answer.
No way I work the Variable Cost, I cannot see how they came up with $1521000. I don't know what I am missing.

Demonstration Problem 2 Nationwide Windows can produce 10,000 windows per year. Its normal year of operations involves the following: $1,760,000 Sales (8,000 units @ $220) Manufacturing cost Variable per unit Fixed Selling and administrative cost Variable (commission) per unit on sales Fixed 150 260,000 12 60,000 During the year, Nationwide is approached by a contractor to buy 1,500 windows for $165 each. The variable sales commission is set to be a flat fee of $12,000 for the special order. The fixed costs are not affected by the decision. Required: 1. Should Nationwide Windows accept or reject the special order for 1,500 windows at $165 each? Why? 2. Assume, instead, that the contractor needs a total of 2,500 windows, all other information remains the same. Should Nationwide accept or reject the special order for 2,500 windows at $165? Why?

Answer 1

On regular units, the selling costs shall be $12 per unit and $60,000 fixed.

But on the special order , it is mentioned that the selling costs shall be $12,000 flat which is a fixed cost, which means that there shall not be any variable selling costs on the units of special order.

So, on regular units, the variable costs per unit shall be $150 manufacturing and $12 selling i.e. $162 in total.

On special order, the variable costs per unit shall be only manufacturing costs i.e. $150 in total.

So, total variable costs on regular units = $162 * 8,000 = $1,296,000

Total variable costs on special order units = $150 * 1,500 = $225,000

Total variable costs = $1,296,000 + $225,000 = $1,521,000

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