Requirement 1
Annual profit would Increase by | $ 15,820.00 |
Working
financial advantage (disadvantage) of accepting the special order | |
Additional Revenue from offer (1400 x $18) | $ 25,200.00 |
Less: Total Additional cost due to acceptance of offer | $ 9,380.00 |
Annual profit would Increase by | $ 15,820.00 |
.
Calculation of Additional Cost of Order | ||
Per Unit | Total | |
Direct material | $ 2.20 | $ 3,080.00 |
Direct labor | $ 2.00 | $ 2,800.00 |
Variable manufacturing overheads | $ 0.70 | $ 980.00 |
Variable selling expenses | $ 1.80 | $ 2,520.00 |
Total Additional cost due to acceptance of order | $ 6.70 | $ 9,380.00 |
.Requirement 2
Relevant cost per unit = | $ 1.80 |
.Only selling cost will be relevant cost because all the manufacturing cost is already done hence that manufacturing cost is sunk cost and irrelevant in the case of 500 units.
Delta Company produces a single product. The cost of producing and selling a single unit of...
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