ABC Company has received a request for a special order of 6,000 units of product A for $21.20 each. Product A's unit product cost is $16.20, determined as follows: $6.10 Direct materials $4.20 Direct labor $2.30 Variable manufacturing overhead $3.60 Fixed manufacturing overhead $16.20 Unit product cost The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product A that would increase the variable costs by $4.20 per unit and that would require an investment of $21,000 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 idle capacity for producing the special order. What is the impact on operating income if the special order is accepted? O $26,400 increase O $16,200 decrease O $51,600 increase O $30,600 increase O $5,400 increase

ABC Company has received a request for a special order of 6,000 units of product A for $21.20 each. Product A's unit product cost is $16.20, determined as follows: $6.10 Direct materials $4.20 Direct labor $2.30 Variable manufacturing overhead $3.60 Fixed manufacturing overhead $16.20 Unit product cost The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product A that would increase the variable costs by $4.20 per unit and that would require an investment of $21,000 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 idle capacity for producing the special order. What is the impact on operating income if the special order is accepted? O $26,400 increase O $16,200 decrease O $51,600 increase O $30,600 increase O $5,400 increase

Name: ABC Company has received a request for a special order of 6,000 units
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Description: ABC Company has received a request for a special order of 6,000 units of product A for $21.20 each.Product A's unit product cost is $16.20, determined as follows:$6.10Direct materials$4.20Direct labor$2.30Variable manufacturing overhead$3.60Fixed ma

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...

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A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price would be 11.50). The order would require specialized materials costing 4.00 per unit. Direct labor and variable factory overhead would cost 2.15 per unit. Fixed factory overhead is 1.20 per unit. However, the company has excess capacity, and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing 1,300. Which of the following is relevant to the special order? a. 11.50 b. 1.20 c. 7.35 d. 8.90
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Gallerani Corporation has received a request for a special order of 6,000 units of product A90 for $21.20 each. Product A90's unit product cost is $16.20, determined as follows: Direct materials Direct labor $ 6.10 4.20 Variable manufacturing overhead Fixed manufacturing overhead 2.30 3.60 Unit product cost $16.20 Assume that 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 modifications made to product A90 that would increase the variable costs by $4.20 per unit and that would require an investment of $21,000 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. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be:
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