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Glade Company produces a single product. The costs of producing and selling a single unit of thi product at the company's current activity level of
Glade Company produces a single product. The costs of producing and selling a single unit of thi
product at the company's current activity level of 8,000 units per month are:
Direct materials
Direct labor.
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling and administrative expenses
Fixed selling and administrative expenses
$2.50
$3.00
$0.50
$4.25
$1.50
$2.00
The normal selling price is $15 per unit. The company's capacity is 10,000 units per month. An order
has been received from a potential customer overseas for 2,000 units at a price of $12.00 per unit.
This order would not affect regular sales.
Required:
1. If the order is accepted, by how much will monthly profits increase or decrease? (The order
would not change the company's total fixed costs.)
2. Assume the company has 500 units of this product left over from last year that are inferior to the
current model. The units must be sold through regular channels at reduced prices. What unit
cost is relevant for establishing a minimum selling price for these units?
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