Capitol, Incorporated has received a special order for 2,000 units of its product at a special price of $195. The product normally sells for $260 and has the following manufacturing costs: Cost per UnitDirect materials$ 78Direct labor52Variable manufacturing overhead39Fixed manufacturing overhead65Total unit cost$ 234Assume that Capitol has sufficient capacity to fill the order without harming normal production and sales.Required:If Capitol accepts the order, what effect will the order have on the company’s short-term profit?What minimum unit price should Capitol charge to achieve a $65,000 incremental profit?Now, assume Capitol is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Capitol accepts the order, what effect will the order have on the company’s short-term profit?

Short-term profit alone does not provide a comprehensive view of a company's overall financial…

Answered: Capitol, Incorporated has received a…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

	Cost per Unit
Direct materials	$ 78
Direct labor	52
Variable manufacturing overhead	39
Fixed manufacturing overhead	65
Total unit cost	$ 234

If Capitol accepts the order, what effect will the order have on the company’s short-term profit?
What minimum unit price should Capitol charge to achieve a $65,000 incremental profit?
Now, assume Capitol is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Capitol accepts the order, what effect will the order have on the company’s short-term profit?

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