Question
A company produces Product A which it normally sells to retailers for $7. The cost of manufacturing 20,000 units is: Materials 10,000 Labour 30,000 Variable
A company produces Product A which it normally sells to retailers for $7. The cost of manufacturing 20,000 units is:
Materials 10,000
Labour 30,000
Variable overhead 20,000
Fixed overhead 40,000
TOTAL 100,000
The company also incurs sales commission of $0.35 on each unit sold.
The company is offered to purchase 5,000 units for $4.80 per unit. If the offer is accepted, it will increase fixed overhead by $6000, but the $0.35/unit sales commission will be eliminated.
Prepare a incremental analysis for the special order, should it be accepted? Why or why not?
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Financial Accounting
Authors: Robert Kemp, Jeffrey Waybright
5th edition
134727797, 9780134728643 , 978-0134727790
