Question

Question 2 Best Buy is a company that manufactures intelio product for the local market. espite having 29% On the average, 10,000 units of the intelio product are produced per month despite havi more capacity. Costs per unit of the intelio product are as follows: 12.50 Direct Material Direct Labor 7.00 Variable Factory Overhead ¢3.45 Variable Selling Expense €0.50 Fixed Factory Overhead 3.00 Fixed Office Expense $2.00 € 28.45 The company received a special order of 2,500 units of the intelio product at $25.00 per from a new customer. Should the company accept the special order, provided that the custom has agreed to pay 25% of the variable selling expenses in addition to the price of the product (8 March

Answer 1

Since the company has spare capacity, no additional fixed costs will be incurred on the special order
Revenues	62,812.50
Direct Material	31,250.00
Direct Labor	17,500.00
Variable Factory Overhead	8,625.00
Variable selling expense	1,250.00
Incremental Profit	4,187.50
Hence, the order should be accepted

А В 1 Since the company has spare capacity, no ac 2500*25+ 0.25*B6 2 Revenues 3 Direct Material 12.5*2500 = 7 *2500 4 Direct Labor 5 Variable Factory Overhead 6 Variable selling expense 7 Incremental Profit 3.45*2500 0.5*2500 B2-SUM(B3:B6) Hence, the order should be accepted 8