Steveo Company produces small gelblasters. The manufacturing costs per unit to produce a small gelblasters are as follows:

• Variable selling costs to obtain and fill orders normally average $6.00 per unit when Steveo sells the gelblasters to local customers. Recently, however, Steveo paid $50 000 to advertise its various products in an international trade magazine.
  The company has just received an order from a large mail-order merchandising company in New Zealand for 800 gelblasters at a total offering price of $58 000. The merchandising company is willing to pay all shipping charges except the initial packaging, which costs $3.00 per gelblaster.
  Required:
  Calculate the total incremental cost that Steveo would expect to incur if it accepted and filled this order. Should Steveo produce the 800 gelblasters and sell them to the New Zealand company?

Transcribed Image Text:

Direct materials $26.00 Direct labour $23.00 Variable overhead $17.00 Fixed overhead $24.00 Total manufacturing cost per unit $90.00.