Question

Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 45,000 units per month is as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling & administrative expense Fixed selling & administrative expense Per Unit $45.18 $ 8.60 $ 1.60 $18.30 $ 2.80 $13.00 The normal selling price of the product is $96.10 per unit. An order has been received from an overseas customer for 2,500 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.70 less per unit on this order than on normal sales. Direct labor is a variable cost in this company Suppose there is ample Idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $81.40 per unit. The monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be: Multiple Choice O $35.000) 0 $16,750 O $62,500 O $20,000)

Answer 1

calculaton of financial advantage (disadvantage)
salling price per unit for special order	81.4
less: variable cost per unit special order
direct material	45.1
direct labor	8.6
variable manufacturing overhead	1.6
variable selling & administartive exp (2.80-1.70)	1.1
total variable cost per unit	56.4
contribution margin per units	25
no of unit for special order	2500
Financial advantage	62500
Option $62500 Is CORRECT