Question

Goshford Company produces a single product and has capacity to produce 130,000 units per month. Costs to produce its current sales of 104,000 units follow. The regular selling price of the product is $130 per unit. Management is approached by a new customer who wants to purchase 26,000 units of the product for $78.30 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead and no additional fixed selling and administrative expenses. The customer is not in the company's regular selling territory, so there will be a $6.60 per unit shipping expense in addition to the regular variable selling and administrative expenses. Direct materials Direct labor Variable manufacturing overhead Pixed manufacturing overhead Variable selling and administrative expenses Pixed selling and administrative expenses Totals Costs at Per Unit 104.000 Units $12.50 $1,300,boo 15.00 1,560,000 12.00 1,248,000 17.50 1.820,000 15.00 1.560.000 15.00 1,560,000 $87.00 $9,048,000

Answer 1

	Normal Volume (104000 units)	Additional Volume (26000 units)	Combined Total (130000 units)
Sales	13520000	2035800	15555800
Cost & Expenses:
Direct Material	1300000	325000	1625000
Direct Labour	1560000	390000	1950000
Variable Overhead	1248000	312000	1560000
Fixed manufacturing Overhead	1820000	-	1820000
Variable selling & admin Exp	1560000	390000	1950000
Fixed selling & admin. Exp	1560000	-	1560000
Additional Shipping Expense	-	171600	171600
Total Cost	9048000	1588600	10636600
Net Income (Loss)	4472000	447200	4919200