Pilot produces gloves which it sells for $35. The company produces 16,000 pairs of these...
80.2K
Verified Solution
Link Copied!
Question
Accounting
Pilot produces gloves which it sells for $35. The company produces 16,000 pairs of these gloves annually but has the capacity to produce 20,000. An order for manufacturing and selling 1,000 pairs at $25 has been received from a big-box home improvement retailer that would not disrupt current operations. Current costs for the gloves are as follows:
Direct materials $ 6.00 Direct labor 10.00 Variable overhead 3.00 Fixed overhead 8.00 Total $27.00
In addition, the retailer would like to add its orange and white logo to each pair which would require an additional $2 per pair of gloves in additional labor costs. Pilot would also have to rent a logo stamper to stamp the logo which would cost $600. Which statement is true with regard to this order?
Incremental costs will be $27,000.
Incremental costs will be $21,600.
Incremental profit will be $4,000.
Incremental costs will exceed incremental revenues by $4,600.
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!
