Pardo Company produces a single product and has capacity to produce 195,000 units per month. Costs to produce its current monthlysales of 156,000 units follow. The normal selling price of the product is $132 per unit. A new customer offers to purchase 39,000 unitsfor $61.20 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general andadministrative costs. The special offer would not affect its normal sales.Direct materialsDirect laborVariable overheadFixed overheadFixed general and administrativeTotals(a) Compute the income from the special offer.(b) Should the company accept the special offer?Required A Required BComplete this question by entering your answers in the tabs below.Variable costsPer Unit$ 12.5015.0010.0017.5013.00$ 68.00SPECIAL OFFER ANALYSISCompute the income for the special offer. (Round your "Per Unit" answers to 2 decimal places.)Contribution marginFixed costsCosts at 156,000UnitsFixed overheadFixed general and administrativeIncome$ 1,950,0002,340,0001,560,0002,730,0002,028,000$ 10,608,000Per Unit0.000.00 $Total0

Decision making relating to special orders is the process that helps the management in making the…

Answered: Pardo Company produces a single product…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitri's normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitri's other operations. PLEASE NOTE: All dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). 1. If Dimitri accepts the offer, what will be the impact on profits of accepting the order? • Incremental dollar amount = o Increase or Decrease? no quotes. Please note: Your answer is either "Increase" or "Decrease" - capital first letters and
Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $78.30 per unit. Determine whether management should accept or reject the new business.
Lusk Corporation produces and sells 14,300 units of Product X each month. The selling price of Product X is $25 per unit, and variable expenses are $19 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72,000 of the $102,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the monthly financial advantage (disadvantage) for the company
Yorkville sells a haircutter at $65 and each unit has variable cost of $25. Yorkville's fixed manufacturing costs are $80,000 when produces at its full capacity of 10,000 units and its its fixed cost per unit is $8 per unit. The company has an offer of 2,000 units at $30 each in an international market, which would not affect its current production but would increase the fixed cost by $5,000. How much is the incremental net income if it accepts the special order? Select one: a. $10,000 profit b. $6,000 loss c. $5,000 profit O d. $70,000 loss
Burns Industries currently manufactures and sells 30,000 power saws per month, although it has the capacity to produce 45,000 units per month. At the 30,000- unit-per-month level of production, the per-unit cost is $85, consisting of $50 in variable costs and $35 in fixed costs. Burns sells its saws to retail stores for $90 each. Allen Distributors has offered to purchase 6,000 saws per month at a reduced price. Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs. Burns decides to accept the special order for 6,000 units from Allen at a unit sales price that will add $120,000 per month to its operating income. The unit price Burns is charging Allen is: Multiple Choice $85. $50 $90. $70.
A company sells its product at P30 per unit.Unit variable cost is P22 and total fixed costs total to P100,000 per month. The company currently pays salaries of P40,000 per month but with no commission. It is considering a compensation plan whereby the sales people would receive 5% commission based on sales, but their salaries would be decreased to P25,000 per month. At what sales level is the company indifferent between the two compensation plans?
According to its original plan, Thornton Consulting Services Company plans to charge its customers for service at $127 per hour in Year 2. The company president expects consulting services provided to customers to reach 49,000 hours at that rate. The marketing manager, however, argues that actual results may range from 44,000 hours to 54,000 hours because of market uncertainty. Thornton's standard variable cost is $44 per hour, and its standard fixed cost is $1,320,000. Required Develop flexible budgets based on the assumptions of service levels at 44,000 hours, 49,000 hours, and 54,000 hours. Flexible Budget 44,000 Hours Flexible Budget Flexible Budget 49,000 Hours 54,000 Hours
Eaton Tool Company has fixed costs of $435,600, sells its units for $94, and has variable costs of $50 per unit. a. Compute the break-even point. Break-even point b. Ms. Eaton comes up with a new plan to cut fixed costs to $340,000. However, more labor will now be required, which will increas variable costs per unit to $53. The sales price will remain at $94. What is the new break-even point? Note: Round your answer to the nearest whole number. New break-even point units Profitability will be less Profitability will be more units c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?
Boulevard Company expects to sell 500,000 units in 2021 at P100 per unit. Variable manufacturing costs in producing the product amount to P40 per unit and fixed manufacturing costs amount to P25.00 per unit. A special order from Devil Company of 50,000 units were made at an offered price of P57.50 per unit. Regular sales from customers will not be affected from this transaction. However, in order to meet the specifications and requirements of Boulevard Company, overtime pay would be incurred amounting to P7.50 per unit. Determine the effect in income when the special order is accepted. Indicate whether increase or decrease 1. 500,000 increase 2. 750,000 decrease 3. 875,000 increase 4. None of the above Group of answer choices 1 2 3 4

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