Question

Inclusive Access 2018-79 4.5 Chapter 7 & 8 Homework Instructions help < Question 4 (of 11) Save & Bxx Submit 5.45 points Exercise 7-9 Special Order (L07-4) Delta Company produces a single product. The cost of producing and selling a single unit of this produd at the company's normal activity level of 60,000 units per year is: Direct matters Direct labor Variable manufacturing overhead Fored manufacturing overhead Variable selling and administrative expense Fored selling and administrative expense $ 5 10 $ 390 $ 100 54.20 5240 The normal selling price is $21 per unit. The company's capacity is 75.000 units per year. An order has been received from a mail-order house for 15.000 units at a special price of $14.00 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 foced costs.) Annual profit would 2. Assume the company has 1.000 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.) Relevant cost per unit References eBook & Resources

Answer 1

1
	Per unit	Total 15000 units
Incremental revenue	14.00	210000
Incremental costs:
Direct materials	5.10	76500
Direct labor	3.80	57000
Variable manufacturing overhead	1.00	15000
Variable selling and administrative costs	1.50	22500
Total Incremental costs		171000
Incremental net operating income(loss)		39000
Annual profits would increase by 39000
2
Relevant cost per unit = Variable selling and administrative costs = $1.50