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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 106,800 units per year is: |
| Direct materials | $ | 1.80 | |
| Direct labor | $ | 4.00 | |
| Variable manufacturing overhead | $ | 1.00 | |
| Fixed manufacturing overhead | $ | 3.75 | |
| Variable selling and administrative expenses | $ | 2.10 | |
| Fixed selling and administrative expenses | $ | 3.00 | |
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The normal selling price is $24 per unit. The company’s capacity is 139,200 units per year. An order has been received from a mail-order house for 2,700 units at a special price of $21.00 per unit. This order would not affect regular sales. |
| Required: |
| 1. |
If the order is accepted, by how much will annual profits be increased or decreased? (The order will not change the company’s total fixed costs.) |
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| 2. |
Assume the company has 500 units of this product left over from last year that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units? (Round your answer to 2 decimal places.) |
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Imperial Jewelers is considering a special order for 22 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $405.00 and its unit product cost is $262.00 as shown below: |
| Direct materials | $ | 140 | |
| Direct labor | 83 | ||
| Manufacturing overhead | 39 | ||
| Unit product cost | $ | 262 | |
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Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $14 of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order would like special filigree applied to the bracelets. This filigree would require additional materials costing $13 per bracelet and would also require acquisition of a special tool costing $459 that would have no other use once the special order is completed. This order would have no effect on the company’s regular sales and the order could be fulfilled using the company’s existing capacity without affecting any other order. |
| Required: |
| 1. |
What effect would accepting this order have on the company’s net operating income if a special price of $365.00 per bracelet is offered for this order? (Enter all amounts as positive values.) |
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| 2. | Should the special order be accepted at this price? | ||||
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As per Chegg guidelines if more than one question is posted than we liable to answer only one question.
Question 1 Delta Company:-
1:-
Annual profit would increased by $32670
Explanation:-
{21 - (1.80 + 4 + 1 + 2.10)} * 2700
= $ 32670.
2:-
Relevant cost = $ 8.90
Explanation:-
1.80 + 4 + 1 + 2.10
= $ 8.90
As per HomeworkLib guidelines if more than one question is posted thn we liable to answer only first question
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