FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:Your Company manufactures industrial components. Data concerning one of its products are given below:
Per Unit
S180
$29
Selling price
Direct materials
Direct labor
Variable manufacturing overhead.
Fixed manufacturing overhead..
Variable selling expense
Fixed selling and administrative expense ..
$5
$21
$2
S17
The above per unit data are based on annual production of 4,000 units of the component when capacity is 8,000 units. The company has received a special, one-time-only order for 500 units of this product.
There would be no variable selling expense on this special arder and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order.
What is the minimum price per unit on the special order below which the company should not go? HINT: What is the breakeven price?
Expert Solution
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Since the company's fixed manufacturing overhead and fixed selling and administrative expense would not affected and there's an idle capacity of 4000 units, these costs shall not be considered while determining the cost for the special order.
The question specifically states that there is no variable selling expense for this order and hence minimum price per unit on the special order below which company should not go shall be as follows
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- When inventory costs rise and inventory quantities are not decreasing, what does the LIFO produces?arrow_forwardFor each situation, list the assumption, principle, or constraint that has been violated, if any. List only one answer for each situation. a. East Lake Company recognizes revenue at the end of the production cycle but before sale. The price of the product, as well as the amount that can be sold, is not certain. choose one of the assumption, principle or constraint Going concern assumptionPeriodicity assumptionNo violationHistorical cost principleRevenue recognition principleEconomic entity assumption b. Hilo Company is in its fifth year of operation and has yet to issue financial statements. (Do not use the full disclosure principle.) choose one of the assumption, principle or constraint Historical cost principleGoing concern assumptionRevenue recognition principleNo violationPeriodicity assumptionEconomic entity assumption c. Gomez, Inc. is…arrow_forwardB) What is meant by the term margin of safety when calculating the break - even point for a product? Is this the same as the profit margin?arrow_forward
- Which of the following is relevant to Limited's decision to accept a special order at a lower price?the shipping costs to the customer CEO's salary Limited's investment its warehouse the cost of its furniture and fixturesarrow_forwardWhat is the purpose of the lower of cost or net realizable value rule? What would happen if a company was to report their inventory at replacement cost?arrow_forward
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