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A customer has requested that Zodiac Inc. fill a special order for 2,200 units of product 547 for $38 a unit. While the product would
A customer has requested that Zodiac Inc. fill a special order for 2,200 units of product 547 for $38 a unit. While the product would be modified slightly for the special order, product B57's normal unit product cost is $16.90: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $4.60 4.00 1.70 6.60 $16.90 Assume that direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product B57 that would increase the variable costs by $1.90 per unit and that would require an investment of $16,000.00 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be: OA. $40,760 OB. ($15,700) OC. $16,200 OD. ($2,000)
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