3. Special Order ABC Corporation makes a range of products. Management is considering a special...
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3. Special Order ABC Corporation makes a range of products. Management is considering a special order for 700 units of product J45 at $50 each. The normal selling price of product J45 is $75. The cost information is as follows: Direct materials Direct labor .. Variable manufacturing overhead.... Fixed manufacturing overhead. Variable selling and administrative expenses. Fixed selling and administrative expenses..... ..$17 per unit $18 per unit ..$5 per unit $13 per unit .$6 per unit ..$12 per unit If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. (a). If the special order were accepted, what would be the impact on the company's overall profit? Please show all calculations and label items clearly. (15 points) (b). Assume the company has 100 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 should be the minimum selling price for these units? Please explain why each cost is relevant or irrelevant for this decision making. (10 points)
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