The following information relates to a product produced by Faulkland Company: Direct materials $ 15 Direct...
The following information relates to a product produced by
Faulkland Company:
| Direct materials | $ | 15 | |
| Direct labor | 12 | ||
| Variable overhead | 11 | ||
| Fixed overhead | 13 | ||
| Unit cost | $ | 51 | |
Fixed selling costs are $1,080,000 per year. Variable selling costs
of $3 per unit sold are added to cover the transportation cost.
Although production capacity is 580,000 units per year, Faulkland
expects to produce only 480,000 units next year. The product
normally sells for $56 each. A customer has offered to buy 68,000
units for $50 each. The customer will pay the transportation charge
on the units purchased. If Faulkland accepts the special order, the
effect on income would be a:
$408,000 decrease.
$612,000 increase.
$68,000 increase.
$816,000 increase.
Homework Answers
Increase (Decrease)
= (Special order price - relevant costs) * no of units
= [50 - (15+12+11)]*68,000
= (50 - 38)*68,000
= 816,000 increase
Add Answer to:
The following information relates to a product produced by
Faulkland Company:
Direct materials
$
15
Direct...
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