Complete answer please.A company receives a special order for 200 units that requires stamping the...
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Complete answer please.
A company receives a special order for 200 units that requires stamping the buyer's name on each unit, yielding an additional fixed cost of $400 to its normal costs. Without the order, the company is operating at 75% of capacity and produces 7,500 units of product at the costs below. The company's normal selling price is $22 per unit. The sales price for the special order is $18 per unit.
The special order will not affect normal unit sales and will not increase fixed overhead and selling expenses. Variable selling expenses on the special order are reduced to one-half the normal amount. Should the company accept the special order?
Costs (7,500 Units) Variable costs per unit Fixed costs Direct materials $37,500 $5.00 Direct labor 60,000 $8.00 20,000 $0.80 $14,000 Overhead (30% variable) Selling expenses (60% variable) 25,000 $2.00 $10,000
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