Ease Products manufactures t-shirts. It has the following costs when its production level is 120,000...
50.1K
Verified Solution
Link Copied!
Question
Accounting
Ease Products manufactures t-shirts. It has the following costs when its production level is 120,000 units (t-shirts): E: (Click the icon to view the costs.) (Click the icon to view additional information.) What will happen to Ease's operating income if it accepts this special order? Complete the following incremental analysis to determine the impact on Ease's operating income if it accepts this special order. (Round all per unit amounts to the nearest cent, $X.XX, and all other amounts to the nearest whole dollar. Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a decrease in contribution margin and/or operating income from the special order.) Total Order (12,000 units) Incremental Analysis of Special Sales Order Decision Per Unit Revenue from special order Less variable expense associated with the order: Direct materials Direct labor Variable manufacturing overhead Contribution margin Less: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special order Total costs for 120,000 units Direct materials Direct labor Variable manufacturing overhead 396,000 72,000 72,000 70,000 Fixed manufacturing overhead 610,000 Total manufacturing costs The company's relevant range extends to 137,000 units. Ease has received a special order for 12,000 t-shirts at a special price of $81,000 for the entire order. The special order t-shirt would use a fabric that is less expensive than the standard fabric used by Ease, which would allow Ease to save $0.70 per t-shirt in direct materials when manufacturing this special order. Ease has the excess capacity to manufacture this special order. Its total fixed costs will not be impacted by the special order
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!