Question
Farrow Co. expects to sell 300,000 units of its product in the next period with the following results. Sales (300,000 units) $ 4,500,000 Costs and
Farrow Co. expects to sell 300,000 units of its product in the next period with the following results.
Sales (300,000 units) | $ | 4,500,000 | |
Costs and expenses | |||
Direct materials | 600,000 | ||
Direct labor | 1,200,000 | ||
Overhead | 300,000 | ||
Selling expenses | 450,000 | ||
Administrative expenses | 771,000 | ||
Total costs and expenses | 3,321,000 | ||
Net income | $ | 1,179,000 | |
The company has an opportunity to sell 30,000 additional units at $13 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs: (1) total overhead would increase by 15% and (2) administrative expenses would increase by $129,000. Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $13 per unit.
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started