Delta 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 93,600 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 2.00 $ 2.00 $ 0.70 5. 3.95 $ 1.90 $ 1.00 The normal selling price is $24.00 per unit. The company's capacity is 123,600 units per year. An order has been received from a mail- order house for 2,500 units at a special price of $21.00 per unit. This order would not affect regular sales or the company's total fixed costs Required: 1 What is the financial advantage (disadvantage) of accepting the special order? 2. As a separate matter from the special order, assume the company's inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for the inferior units? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order? Required 2 > Futura Company purchases the 78,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.90 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.40 as shown below Per Unit $5.00 Total 2.20 Direct materials Direct lobor Supervision Depreciation Variable manufacturing overhead Rent Total product cost 1.60 5 124,300 1.50 $ 117,000 0.70 9.40 $ 31,200 $11.40 Futura decides to make the starters, a supervisor would have to be hired (at a salary of S124,800) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $82,000 per period. Depreciation is due to obsolescence rather than wear and tear Required: What is the financial advantage (disadvantage) of making the 78,000 starters instead of buying them from an outside supplier? Thalassines kataskeves, S.A. of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows: $450, cee $ 128,000 41,000 21,000 Thalassines kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin Fixed expenses: Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) General factory overhead Salary of product line manager Insurance on inventories Purchasing department Total fixed expenses Net operating loss 190.000 260.ee 26,000 108,800 49,000 130,000 8,000 56,000 377,000 $ (117,000) *Common costs allocated on the basis of machine hours. tCommon costs allocated on the basis of sales dollars Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company's total general factory overhead or total Purchasing Department expenses. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line
