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Hamper Corporation, which produces one product, had the following income statement for a recent month: Hamper Corporation Income Statement For the Month of April
Hamper Corporation, which produces one product, had the following income statement for a recent month: Hamper Corporation Income Statement For the Month of April 2021 Sales Cost of goods sold Gross profit Selling and administrative $40,500 27,300 $ 13,200 10,000 $ 3,200 Net income There were no beginning or ending inventories of work-in-process or finished goods. Hamper's manufacturing costs were as follows: Direct materials (1,350 units x $3.50) Direct labor (1,350 units x $6.50) Variable overhead (1,350 units x $6.00) Fixed overhead Total Average cost per unit $ 4,725 8,775 8,100 5,700 $27,300 $ 20.22 Selling and administrative expenses include a 4% sales commission. The remainder of the selling and admin expenses are fixed. Hamper has just received a special order from a firm in Turkey to purchase 765 units at $25 each. The order will not affect the selling price to regular customers but requires additional fixed overhead of $1,750. Sales commission will not be paid on the special order. Required: a. b. Prepare a relevant cost analysis of the relevant costs and revenues associated with the decision to accept or reject the special order, assuming Hamper has excess capacity. Indicate if Hamper should accept or reject the special order. Determine the net advantage or disadvantage (profit increase or decrease) of accepting the order, assuming Hamper does not have excess capacity. Indicate if Hamper should accept or reject the special order.
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