Office Products produces three models of commercial shelving: the A, B, and C models. Data on operations and costs for the month are the following:

A B C Total

Machine hours8,0006,0004,00018,000

Direct labor hours6,0006,0004,00016,000

Units produced1,0005002501,750

Direct material costs$ 20,000$12,500$ 7,500$ 40,000

Direct labor costs129,000100,00071,000300,000

Manufacturing overhead costs500,800

Total costs840,800

Required: Compute the unit cost for each model, assuming Office Products uses:

(a) Direct labor hours to allocate overhead costs.

(b) Direct labor costs to allocate overhead costs.

(c) Machine hours to allocate overhead costs.

The following information relates to a product produced by Martin Company.

Direct Materials$ 50

Direct Labor35

Variable Overhead30

Fixed Overhead40

Unit Cost$155

Fixed selling costs are $1,000,000 per year. Although production capacity is 900,000 units per year, Martin expects to produce only 800,000 units next year. The product normally sells for $190 each. A customer has offered to buy 60,000 units for $160 each. The customer will pay the transportation charge on the units purchased.

Required:

(a) Compute the effect on income if Martin accepts the special order.

(b) If Martin accepts the special order, how much could normal sales drop before all of the differential profits disappear?

The following information relates to a product produced by Martin Company.

Direct Materials$ 50

Direct Labor35

Variable Overhead30

Fixed Overhead40

Unit Cost$155

Fixed selling costs are $1,000,000 per year. Although production capacity is 900,000 units per year, Martin expects to produce only 800,000 units next year. The product normally sells for $190 each. A customer has offered to buy 60,000 units for $160 each. The customer will pay the transportation charge on the units purchased.

Required:

(a) Compute the effect on income if Martin accepts the special order.

(b) If Martin accepts the special order, how much could normal sales drop before all of the differential profits disappear?