Question

and a New Tab Search Problem 7-114 LO 7-3 Capitol has recelved a special order for 2.,000 units of ts product at a special price of $195 The product nomaly sells for $260 and has the following manufecturing cost s 73 Direct tabor overmead Fored ng overhead $234 Assume that Capitol has suiclent capacity to ilthendwhoud harming normal production and sales and all foed ovetheadis a. t Capitol accapts the order what effc wel the ordor have on the company s short torm prot

Answer 1

Req a:
Incremental profits under Special order:
Incremental sales (2000 units @195)				390,000
Less: Incremental cost:
material (2000 units @ 78)				156000
Labour (2000 unts @52)				104000
variable OH (2000 units @39)				78000
Net Increase in income				52,000
Req b:
Required incremental profits:					66000
Less: Incremental profits earned from exisitng price					52000
Additional profits required					14000
Number of units					2000
Additional Selling price (14000/2000 units)					7
Add: Existing Selling price					195
New revised Sselling price for special order					202