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Pardo Company produces a single product and has capacity to produce 145,000 units per month. Costs to produce its current monthly sales of 116,000
Pardo Company produces a single product and has capacity to produce 145,000 units per month. Costs to produce its current monthly sales of 116,000 units follow. The normal selling price of the product is $150 per unit. A new customer offers to purchase 29,000 units for $64.80 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. Direct materials Direct labor Variable overhead Fixed overhead Fixed general and administrative Totals (a) Compute the income from the special offer. (b) Should the company accept the special offer? Per Unit $12.50 15.00 14.00 Costs at 116,000 Units $ 1,450,000 1,740,000 1,624,000 2,030,000 1,508,000 17.50 13.00 $ 72.00 $ 8,352,000 Sales Variable costs SPECIAL OFFER ANALYSIS Per Unit Total Direct materials Direct labor Variable overhead i Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income 0.00 0 $ 0.00 $ 0
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