Hawkins Company produces a single product The cost of producing and selling a single unit of this product at the companys current activity level of 60,000 units per year is as follows Direct materials $5 10 Direct labor 3 80 Variable manufacturing overhead 1 00 Fixed manufacturing overhead 4 20 Variable selling and administrative expenses 1 50 Fixed selling and administrative expenses 2 40 The normal selling price is $21 per unit The companys capacity is 75,000 units per year An order has been received from a mail order house for 15,000 units at a price of $14 per unit This order would not affect regular sales Required If the order is accepted, by how much will annual profits be increased or decreased The order would not change the companys total fixed costs Show computations to support your answer and be sure to identify the dollar amount as either an increase or decrease Suppose the company does not have enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 5,000 units for regular customers What would be the minimum acceptable price per unit for the special order Assume the company has 1,000 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 Explain (briefly) (I am looking for a dollar amount and for one particular word that describes the costs you did not consider relevant )

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Hawkins Company produces a single product. The cost of producing and selling a single unit of this product at the companys current activity level of

Hawkins Company produces a single product. The cost of producing and selling a single unit of this product at the companys current activity level of 60,000 units per year is as follows:

Direct materials $5.10

Direct labor 3.80

Variable manufacturing overhead 1.00

Fixed manufacturing overhead 4.20

Variable selling and administrative expenses 1.50

Fixed selling and administrative expenses 2.40

The normal selling price is $21 per unit. The companys capacity is 75,000 units per year. An order has been received from a mail-order house for 15,000 units at a price of $14 per unit. This order would not affect regular sales.

Required

If the order is accepted, by how much will annual profits be increased or decreased? The order would not change the companys total fixed costs. Show computations to support your answer and be sure to identify the dollar amount as either an increase or decrease.

Suppose the company does not have enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 5,000 units for regular customers. What would be the minimum acceptable price per unit for the special order?

Assume the company has 1,000 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? Explain (briefly). (I am looking for a dollar amount and for one particular word that describes the costs you did not consider relevant.)