Question
Pilgrim Corporation manufactures a number of products. The company's predetermined overhead rate is $24 per direct working hour, calculated using the following budgeted data: Variable
Pilgrim Corporation manufactures a number of products. The company's predetermined overhead rate is $24 per direct working hour, calculated using the following budgeted data:
Variable production load | $ | 84.000 | |
Fixed production load | $ | 420.000 | |
Direct working hours | 21.000 | ||
Management is considering placing a special order for 780 N89E products at $72 each. The normal selling price of N89E is $83, and the unit cost is determined as follows: |
Direct materials | $ | 45.00 | |
direct labor | 16.00 | ||
Production overhead applied | 24.00 | ||
unit product cost | $ | 85.00 | |
Normal sales of this and other products will not be affected if a special order is accepted. The company has sufficient excess capacity to manufacture additional units. Suppose direct labor is a variable cost, the variable production overhead is indeed directly due to labor-hours, and the total fixed production overhead is not affected by the special order. |
Necessary:
What will be the impact on the company's overall profit if the special order is accepted?
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