Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this
Question:
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 54,000 units per month is as follows:
Per Unit
Direct materials $49.60
Direct labor $9.50
Variable manufacturing overhead $2.50
Fixed manufacturing overhead $20.10
Variable selling & administrative expense $4.60
Fixed selling & administrative expense $22.00
The normal selling price of the product is $114.10 per unit.
An order has been received from an overseas customer for 3,400 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $2.60 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.
Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $90.40 per unit. The monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be:
Multiple Choice
- $22,780
- ($60,860)
- $91,120
- ($72,000)