33 Suppose a company operates with some spare capacity and receives a one-time special order of 5,000
Question:
33 Suppose a company operates with some spare capacity and receives a one-time special order of 5,000 units that has a contribution margin per unit of special order of 11. The contribution margin earned on regular customers (unaffected by this deal) is much higher, at 32. What is the contribution margin that managers should consider, in order to choose whether to accept or reject the offer?
- 11
- 32
- 22
- None of the above
(To answers questions 34-35, use the following information)
Danilo Walls, Inc. uses departmental cost driver rates to allocate manufacturing indirect costs to jobs. Manufacturing indirect costs are allocated on the basis of machine-hours in the Machining Department and on the basis of direct labor-hours in the Assembly Department. The budget provided the following estimates for the coming year, and actual data were collected in the first quarter of the year related to Job #12.
Data for the firm (master budget) | Machining | Finishing |
Direct labor hours | 55,000 | 40,000 |
Machine hours | 12,000 | 29,000 |
Direct labor costs | 400,000 | 800,000 |
Manufacturing overhead costs | 315,000 | 215,000 |
Data for Job #12 (actual) | Machining | Finishing |
Direct labor hours | 120 | 90 |
Machine hours | 80 | 20 |
Direct materials cost | 3,460 | 1,700 |
Direct labor cost | 120 | 632 |
34What is the indirect cost rate that will be used to allocate overhead costs of the machining department at Danilo Wall, Inc.?
- 5.38
- 9.64
- 20.88
- 26.25
35What is the total amount of manufacturing overheads that will be allocated to Job #12 under normal job costing?
- 2,100
- 8,496
- 2,584
- 5,680