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Pardo Company produces a single product and has capacity to produce 180,000 units per month. Costs to produce its current monthly sales of 144,000
Pardo Company produces a single product and has capacity to produce 180,000 units per month. Costs to produce its current monthly sales of 144,000 units follow. The normal selling price of the product is $136 per unit. A new customer offers to purchase 36,000 units for $65.70 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. Costs at 144,000 Units: Direct materials Direct labor Variable overhead Fixed overhead Fixed general and administrative Totals (a) Compute the Income from the special offer. Per Unit $12.50 $ 1,800,000 15.00 14.00 17.50 2,160,000 2,016,000 2,520,000 14.00 2,016,000 $ 73.00 $ 10,512,000 (b) Should the company accept the special offer? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Compute the income for the special offer. (Round your "Per Unit" answers to 2 decimal places.). SPECIAL OFFER ANALYSIS Sales Variable costs Direct materials Direct labor Variable overhead Contribution margin Fixed costs Per Unit Total $ 65.70 $ 1,800,000 6 12.50 1,800,000 15.00 2,160,000 14.00 2,016,000 24.20 (4,176,000) 000 Fixed overhead Fixed general and administrative 24.20 S (4,176,000) Income
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