Question

Goshford Company produces a single product and has capacity to produce 140,000 units per month. Costs to produce its current sales of 112,000 units follow. The regular selling price of the product is $136 per unit. Management is approached by a new customer who wants to purchase 28,000 units of the product for $79.20 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead and no additional fixed selling and administrative expenses. The customer is not in the company's regular selling territory, so there will be a $6.20 per unit shipping expense in addition to the regular variable selling and administrative expenses Costs at 112,000 Units $1,400,000 1,680,000 1,120,000 1,960,000 1,904,000 Per Unit Direct materials $12.50 Direct labor 15.00 Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses 10.00 17.50 17.00 16.00 1,792,000 $88.00 $9,856,000 Totals Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $79.20 per unit.

Answer 1

Calauation af net income(loss) on additioml Volume Cकी के units 23 000 Paaticolass Per unit $2,217,6o0 $79.20 Sales 350,000 12.S0 Drect aterials DArect lakou Vasiale ranifactaing10 00 Oveahead Fred manfactusing $ 420/000 $1500 $230/000 17 S0 overhead Vagiable Selling and administation eafenses $ 1700 $476,000 Fited Selling and Adhinistrabion enpenses $16.00 $491/600 Net oncome orking notes net 3ncomes= Total Sales- Total Casts and expenses 2 In question, dleasy Says that if onder is acepted fred manufactuming avesheael ared na abitional fred Selling and administation there uill e no additiona Tల efenses So ase not taken

Caleulation of Combined total net hsme Additional Comkined Tota volome Nolume Cales 5,932po02,217,00 17u9,600 Casts ard epensSes Digect materials 1,400,000 3000 1,750,O00 Dect labousr 1,680/000 420,000 2,(00/00o Vaiable ansadia overhead Fred onofactiming 000 aveshead Vagialle Seling andd adninistaion04/000476,000 2,38opo0 ,y001000 1,120,000280000 1/960/000 efenses Fred Seling and Oedminsbotion esfers 1792,000 1792poo 5,376/0001 691,60o 6,082,600 net Income Cobired Tatal 9ncome is 6,66, 600 Company Can accept this onder Lecause Compary is eaanirg of $691/600. additional gnasne an