FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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A customer has asked Lalka Corporation to supply 4,500 units of product H60, with some modifications, for $42.70 each. The normal
selling price of this product is $49.35 each. The normal unit product cost of product H60 is computed as follows:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Unit product cost
$ 16.20
2.80
10.00
9,40
$ 38.40
Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The
customer would like some modifications made to product H60 that would increase the variable costs by $5.30 per unit and that would
require a one-time investment of $24,750 in special molds that would have no salvage value. This special order would have no effect
on the company's other sales. The company has ample spare capacity for producing the special order.
Required:
Determine the financial advantage or disadvantage of accepting the special order.
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Transcribed Image Text:A customer has asked Lalka Corporation to supply 4,500 units of product H60, with some modifications, for $42.70 each. The normal selling price of this product is $49.35 each. The normal unit product cost of product H60 is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $ 16.20 2.80 10.00 9,40 $ 38.40 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product H60 that would increase the variable costs by $5.30 per unit and that would require a one-time investment of $24,750 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required: Determine the financial advantage or disadvantage of accepting the special order.
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