Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
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Pardo Company produces a single product and has capacity to produce 125,000 units per month. Costs to produce its current monthly
sales of 100,000 units follow. The normal selling price of the product is $136 per unit. A new customer offers to purchase 25,000 units
for $63.00 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and
administrative costs. The special offer would not affect its normal sales.
Direct materials
Costs at 100,000
Units
$ 1,250,000
Direct labor
Variable overhead
Fixed overhead
Fixed general and administrative
Totals
Per Unit
$ 12.50
15.00
1,500,000
10.00
17.50
15.00
1,000,000
1,750,000
1,500,000
$ 70.00
$ 7,000,000
(a) Compute the income from the special offer.
(b) Should the company accept the special offer?
Complete this question by entering your answers in the tabs below.
Required A
Required B
Compute the income for the special offer.
Note: Round your "Per Unit" answers to 2 decimal places.
SPECIAL OFFER ANALYSIS
Variable costs
Contribution margin
Fixed costs
Fixed overhead
Fixed general and administrative
Income
Per Unit
Total
Required A
Required B >
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Transcribed Image Text:Pardo Company produces a single product and has capacity to produce 125,000 units per month. Costs to produce its current monthly sales of 100,000 units follow. The normal selling price of the product is $136 per unit. A new customer offers to purchase 25,000 units for $63.00 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales. Direct materials Costs at 100,000 Units $ 1,250,000 Direct labor Variable overhead Fixed overhead Fixed general and administrative Totals Per Unit $ 12.50 15.00 1,500,000 10.00 17.50 15.00 1,000,000 1,750,000 1,500,000 $ 70.00 $ 7,000,000 (a) Compute the income from the special offer. (b) Should the company accept the special offer? Complete this question by entering your answers in the tabs below. Required A Required B Compute the income for the special offer. Note: Round your "Per Unit" answers to 2 decimal places. SPECIAL OFFER ANALYSIS Variable costs Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income Per Unit Total Required A Required B >
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