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Direct materials Direct labour Manufacturing overhead Unit product cost $124.00 76.00 24.00 $224.00

Direct materials Direct labour Manufacturing overhead Unit product cost $124.00 76.00 24.00 $224.00

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter15: Lean Accounting And Productivity Measurement
Section: Chapter Questions
Problem 2CE: During the week of June 12, Harrison Manufacturing produced and shipped 15,000 units of its aluminum...
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8 Sato Awards has had a request for a special order of 10 silver-plated trophies from the provincial tennis association. The normal selling price of such a trophy is $336.00 and its unit product cost is $224.00, as shown below: Direct materials Direct labour Manufacturing overhead Unit product cost $124.00 76.00 24.00 $224.00 Most of the manufacturing overhead is fixed and unaffected by variations in how many trophies are produced in any given period. However, $4 of the overhead is variable, depending on the number of trophies produced. The customer would like a special logo applied to the trophies requiring additional materials costing $3 per trophy and would also require acquisition of a special tool costing $420 that would have no other use once the special order was completed. This order would have no effect on the company's regular sales, and the order could be filled using the company's existing capacity without affecting any other order. Required: a. What effect would accepting this order have on the company's operating income if a special price of $291.00 is offered per trophy for this order? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Net operating income
Transcribed Image Text:8 Sato Awards has had a request for a special order of 10 silver-plated trophies from the provincial tennis association. The normal selling price of such a trophy is $336.00 and its unit product cost is $224.00, as shown below: Direct materials Direct labour Manufacturing overhead Unit product cost $124.00 76.00 24.00 $224.00 Most of the manufacturing overhead is fixed and unaffected by variations in how many trophies are produced in any given period. However, $4 of the overhead is variable, depending on the number of trophies produced. The customer would like a special logo applied to the trophies requiring additional materials costing $3 per trophy and would also require acquisition of a special tool costing $420 that would have no other use once the special order was completed. This order would have no effect on the company's regular sales, and the order could be filled using the company's existing capacity without affecting any other order. Required: a. What effect would accepting this order have on the company's operating income if a special price of $291.00 is offered per trophy for this order? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Net operating income
b. Should the special order be accepted at this price? Yes 2 No
Transcribed Image Text:b. Should the special order be accepted at this price? Yes 2 No
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