Question 4 (2 points) South Street Stitching Company (South Street) manufactures and sells a variety of...
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Question 4 (2 points) South Street Stitching Company (South Street) manufactures and sells a variety of handmade purses, wallets, and laptop bags. South Street provided the following information related to production of their line of laptop bags which normally sell for $200 each: Direct materials Direct labour Manufacturing overhead* $70 $55 $30 $155 Unit product cost *Manufacturing overhead includes a variable component of $7 per unit, with the remaining amount of manufacturing overhead being made up of fixed expenses which do not change based on the volume of production. West Avenue Company has approached South Street to request a special order of 100 laptop bags which are embossed with their company logo. West Avenue has offered to pay $175 per unit. The custom embossing requires South Street to purchase a custom die with West Avenue's logo for $1,200 which would have no other use after fulfilling the special order. The embossing process requires additional direct labour cost of $13 per unit This order would not affect South Street's regular sales. South Street's production facility has the capacity to produce 2,000 units per month and is currently only producing 1,500 units per month. Required A. Calculate the impact on South Street's net income if it were to accept the special order from West Avenue B. What is the minimum price South Street would need to charge on the West Avenue special order to cover the costs of the custom bags? Question 4 (2 points) South Street Stitching Company (South Street) manufactures and sells a variety of handmade purses, wallets, and laptop bags. South Street provided the following information related to production of their line of laptop bags which normally sell for $200 each: Direct materials Direct labour Manufacturing overhead* $70 $55 $30 $155 Unit product cost *Manufacturing overhead includes a variable component of $7 per unit, with the remaining amount of manufacturing overhead being made up of fixed expenses which do not change based on the volume of production. West Avenue Company has approached South Street to request a special order of 100 laptop bags which are embossed with their company logo. West Avenue has offered to pay $175 per unit. The custom embossing requires South Street to purchase a custom die with West Avenue's logo for $1,200 which would have no other use after fulfilling the special order. The embossing process requires additional direct labour cost of $13 per unit This order would not affect South Street's regular sales. South Street's production facility has the capacity to produce 2,000 units per month and is currently only producing 1,500 units per month. Required A. Calculate the impact on South Street's net income if it were to accept the special order from West Avenue B. What is the minimum price South Street would need to charge on the West Avenue special order to cover the costs of the custom bags?
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A Impact on South Streets Net Income Increased Revenue Number of bags ordered 100 units Price offere... View the full answer
Related Book For
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118033890
3rd Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly
Posted Date:
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