Question
Pardo Company produces a single product and has capacity to produce 155,000 units per month. Costs to produce its current monthly sales of 124,000 units
Pardo Company produces a single product and has capacity to produce 155,000 units per month. Costs to produce its current monthly sales of 124,000 units follow. The normal selling price of the product is $124 per unit. A new customer offers to purchase 31,000 units for $61.20 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales.
| Per Unit | Costs at 124,000 Units | |
|---|---|---|
| Direct materials | $ 12.50 | $ 1,550,000 |
| Direct labor | 15.00 | 1,860,000 |
| Variable overhead | 10.00 | 1,240,000 |
| Fixed overhead | 17.50 | 2,170,000 |
| Fixed general and administrative | 13.00 | 1,612,000 |
| Totals | $ 68.00 | $ 8,432,000 |
(a) Compute the income from the special offer. (b) Should the company accept the special offer?
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
NHS Audit Committee Handbook Practical Guides
Authors: Governance And Audit Committee
3rd Edition
1904624839, 978-1904624837
