Question
4 (35 Points) Juliani Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal
4 (35 Points) Juliani Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 50,000 units per month is as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling & administrative expense Fixed selling & administrative expense The normal selling price of the product is $85.00 per unit. $ 39.50 $ 8.20 $ 1.50 $21.90 $ 1.40 $ 7.30 An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $0.30 less per unit on this order than on normal sales. Direct materials and direct labor are variable costs in this company. Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $69.60 per unit. Required: 1. Determine the effect (in total $) on the company's total net operating income of accepting the special order. Incremental revenue Less incremental costs: Total incremental cost Net effect 2. Based on the analysis, should Juliani Accept or Reject the special offer. "Accept" or "Reject") What is the financial advantage of doing so? (Indicate 10
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