Question

Check my work Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 102,000 units per year is: Direct materials $1.90 $2.00 $0.90 $4.45 Variable selling and administrative expenses $1.80 $1.00 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling and administrative expenses The normal selling price is $24.00 per unit. The company's capacity is 114,000 units per year. An order has been received from a mail- order house for 1,000 units at a special price of $21.00 per unit. This order would not affect regular sales or the company's total fixed costs. Requlred: 1. What is the financial advantage (disadvantage) of accepting the special order? 2 As a separate matter from the special order, assume the company's inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for these units? Complete this question by entering your answers in the tabs below. Required 2 Required 1 What is the financial advantage (disadvantage) of accepting the special order? < Required 1 Required 2 >

Please Answer only Required 1 and 2 , thank you.

Answer 1

Required 1. The Financial Aduantage (disaduantage) of accepting special order: Sales (1000x $21.00) $21,000 Less: Vastable Expenses. Direct Material (2000 x 1.90) . (1900) Direct.Labor (100 x 2.00) .. (2000) Variable Manufacturing ouerhead. .. (1000 x 0.90) (900) Variable Selling and Administrative overhead (1000 x $1.80) (1800) Financial Aduantage $14,400 Financial Aduantage $14,400 Ans. Required 2 Relevant Cost per unit = $6.60 Ans Relevant costs are all the cost necessary to incur or con are incurred for those products only author In the given question, all variable costs are belevant cost and fixed cost are not considered relevant as they are not specifically incurred Itence, Relevant cost per unit is $660 ( 1.90+2.00 40.90 +1.807