PART B.

Special Order Total cost data follow for Greenfield Manufacturing Company, which has a normal capacity per period of 20,000 units of product that sell for $54 each. For the foreseeable future, regular sales volume should continue to equal normal capacity. Direct material $268,800 Direct labor 202,000 Variable manufacturing overhead 154,000 Fixed manufacturing overhead (Note 1) 118,800 Selling expense (Note 2) 129,600 Administrative expense (fixed) 50,000 $923,200 Notes: 1. Beyond normal capacity, fixed overhead costs increase $4,500 for each 1,000 units or fraction thereof until a maximum capacity of 24,000 units is reached. 2. Selling expenses consist of a 10% sales commission and shipping costs of $1 per unit. Greenfield pays only one-half of the regular sales commission rates on sales amounting to $3,000 or more. Greenfield's sales manager has received a special order for 2,500 units from a large discount chain at a price of $44 each, F.O.B. factory. The controller's office has furnished the following additional cost data related to the special order: 1. Changes in the product's design will reduce direct material costs by $4 per unit. 2. Special processing will add 10% to the per-unit direct labor costs. 3. Variable overhead will continue at the same proportion of direct labor costs. 4. Other costs should not be affected. a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.) Differential Analysis Per Unit Total $ 110,000 $ 9.44 Differential revenue Differential costs Direct material Direct labor Variable manufacturing overhead Selling: 11.11 8.36 x a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.) Differential Analysis Per Unit Total $ 110,000 $ 9.44 11.11 8.36 x Differential revenue Differential costs Direct material Direct labor Variable manufacturing overhead Selling: Commission Shipping (F.O.B. factory terms) Total variable cost Contribution margin from special order Fixed cost increment: Extra cost Profit on special order 2.2 0 $ 30.9 X 77,250 x 32,750 X 13,500 19,250 x $ b. What is the lowest price Greenfield could receive and still make a profit of $5,000 before income taxes on the special order? Round answer to two decimal places, if applicable. $ 39.62 X Check Partially correct