Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Jones Products manufactures and sells to wholesalers approximately 400,000 packages per year of underwater markers at $3.85 per package. Annual costs for the production and
Jones Products manufactures and sells to wholesalers approximately 400,000 packages per year of underwater markers at $3.85 per package. Annual costs for the production and sale of this quantity are shown in the table.
Direct materials | $ | 512,000 | |
Direct labor | 128,000 | ||
Overhead | 384,000 | ||
Selling expenses | 160,000 | ||
Administrative expenses | 107,000 | ||
Total costs and expenses | $ | 1,291,000 | |
A new wholesaler has offered to buy 67,000 packages for $3.49 each. These markers would be marketed under the wholesalers name and would not affect Jones Productss sales through its normal channels. A study of the costs of this additional business reveals the following:
- Direct materials costs are 100% variable.
- Per unit direct labor costs for the additional units would be 50% higher than normal because their production would require overtime pay at 1 times the usual labor rate.
- 30% of the normal annual overhead costs are fixed at any production level from 350,000 to 500,000 units. The remaining 70% of the annual overhead costs are variable with volume.
- Accepting the new business would involve no additional selling expenses.
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