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stion 1 Special Order Decision (7 marks Juliani Company produces a single product. The cost of producing and selling a single unit of thi product at the companys normal activity level of 50.000 units per month is as followS Direct materials Direct labor Variable manufacturing overhead 7.50 50 20.90 1.90 7.30 Fixed manufacturing overhead Variable selling& administrative expense Fixed selling & administrative expense The normal selling price of the product is $75.00 per unit An order has been received from overseas special discounted price. This order would have no effect on the companys normal sales and the tota amount of the companys fixed selling & administrative expense m an overseas customer for 3,000 units to be delivered this month at decrease by 10%. The variabl than on normal sale would selling and administrative expense would decrease by $1.50 per unit on this order Direct labor is a variable cost in this company Required: Suppose there is sufficient capacity to produce the units required by the overseas customer and the special discounted price on the special order is S60.50 per unit. Should the company accept the or ?Support your answer by the relevant calculations

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C2 if order is if order is not accepted accepted sales units sales -costs direct materials direct labor variable manufacturing overhead fixed manufacturing overhead 50,000 53,000 $ 3,750,000 $3,931,500 1,125,000 $1,192,500 $ 375,000 397,500 $ 75,00079,500 $ 1,045,000 $1,045,000 variable selling & administrative overhead95,000 $ 96,200 fixed selling & administrative overhead 365,000 328,500 6 10 12 13 14 15 16 17 18 S3,080,000 $3,139,200 670,000 792,300 increase in net income if special order is accepted $122,300 total costs net income since there is increase in net income by $122,300 by accepting special order, the special order should be accepted decision - 19 21

for formulas and calculations, refer to the image below -

if order is not accepted if order is accepted sales units sales - costs direct materials direct labor variable manufacturing overhead fixed manufacturing overhead variable selling & administrative overhead 1.9 D3 fixed selling & administrative overhead 53000 4 75*D3 D4+60.5 3000 22.5 D3 7.5 D3 1.5 D3 20.9 D3 22.5*E3 7.5ЕЗ 1.5*E3 9 10 D10+(1.9-1.5)3000 -D11*90% 7.3*D3 13 14 15 16 total costs -SUM(D6:D11 -SUM(E6:E11 net income D4-D13 E4-E13 increase in net income if special order is accepted E15-D15 18 since there is increase in net income by $122,300 by accepting special order, the special order should be accepted. decision - 20 21

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