Costs at Per Unit 80,000 Units Direct materials. $12.50 $1,000,000 Direct labor.... 15.00 1,200,000 Variable manufacturing overhead 10.00 800,000 Fixed manufacturing overhead . Variable selling and administrative expenses 17.50 1,400,000 14.00 1,120,000 Fixed selling and administrative expenses. 13.00 1,040,000 Totals..... $82.00 $6,560,000

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 5PB: Wrappers Tape makes two products: Simple and Removable. It estimates it will produce 369,991 units...
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Goshford Company produces a single product and has capacity to produce 100,000 units per month. Costs to produce its current sales of 80,000 units follow. The regular selling price of the product is $100 per unit. Management is approached by a new customer who wants to purchase 20,000 units of the product for $75 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead and no additional fixed selling and administrative expenses. The customer is not in the company’s
regular selling territory, so there will be a $5 per unit shipping expense in addition to the regular variable selling and administrative expenses. Determine whether management should accept or reject the new business.

Costs at
Per Unit
80,000 Units
Direct materials.
$12.50
$1,000,000
Direct labor....
15.00
1,200,000
Variable manufacturing overhead
10.00
800,000
Fixed manufacturing overhead .
Variable selling and administrative expenses
17.50
1,400,000
14.00
1,120,000
Fixed selling and administrative expenses.
13.00
1,040,000
Totals.....
$82.00
$6,560,000
Transcribed Image Text:Costs at Per Unit 80,000 Units Direct materials. $12.50 $1,000,000 Direct labor.... 15.00 1,200,000 Variable manufacturing overhead 10.00 800,000 Fixed manufacturing overhead . Variable selling and administrative expenses 17.50 1,400,000 14.00 1,120,000 Fixed selling and administrative expenses. 13.00 1,040,000 Totals..... $82.00 $6,560,000
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