Question
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the companys normal activity level of
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the companys normal activity level of 97,200 units per year is:
Direct materials $ 1.60
Direct labor $ 3.00
Variable manufacturing overhead $ .60
Fixed manufacturing overhead $ 4.95
Variable selling and administrative expenses $ 1.50
Fixed selling and administrative expenses $ 2.00
The normal selling price is $19 per unit. The companys capacity is 133,200 units per year. An order has been received from a mail-order house for 3,000 units at a special price of $16.00 per unit. This order would not affect regular sales.
Required: 1. If the order is accepted, by how much will annual profits be increased or decreased? (The order will not change the companys total fixed costs.)
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