#6

Farrow Company reports the following annual results. Per Unit $ 15.00 Annual Total $ 2,250,000 Contribution Margin Income Statement Sales (150,000 units) Variable costs Direct materials Direct labor Overhead Contribution margin Fixed costs Fixed overhead Fixed general and administrative 2.00 4.00 2.50 6.50 300,000 600,000 375,000 975,000 2.09 300,000 225,000 1.50 Income $ 3.00 $ 450,000 The company receives a special offer for 15,000 units at $12 per unit. The additional sales would not affect its normal sales. Variable costs per unit would be the same for the special offer as they are for the normal units. The special offer would require incremental fixed overhead of $60,000 and incremental fixed general and administrative costs of $4,500. (a) Compute the income or loss for the special offer. (b) Should the company accept the special offer? Required A Required B Compute the income or loss for the special offer. (Round your "Per Unit" answers to 2 decimal places.) SPECIAL OFFER ANALYSIS Per Unit Total Sales 15.00 $ 2,250,000 Variable costs Direct materials 2.00 Direct labor 4.00 300,000 600,000 375,000 Variable overhead 2.50 Contribution margin 6.50 975,000 Fixed costs Fixed overhead 2.18 Fixed general and administrative 3,600,000 229,500 1,39