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Please show working Kesho Company manufactures MP3 players. The company has annual production capacity of 20,000 units. The company operates this year at 90% of
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Kesho Company manufactures MP3 players. The company has annual production capacity of 20,000 units. The company operates this year at 90% of its total production capacity. The selling price per unit is $250. Cost data per-unit are as follows: Direct Material Direct Labor Variable Factory Overhead Fixed Factory Overhead Shipping costs Sales commission Fixed Selling & Admin expenses Total cost per unit $35 $17 $13 $50.50 $32 $12.50 (5% of sales revenues) $50 $210 Kesho received a special order from Leo Co. to purchase 6,000 units @ $150 per unit. The material that will be used for the special order is of lower quality and will enable Kesho to save $5 per unit in DM costs. The shipping cost will be paid by Leo. The sales commission will be paid on the special order. PARTA Assume that if Kesho accepted the special order, it will have to give up some of its regular customers. What is the change in operating income if Kesho accepts the special order? (enter as negative number if it is a net loss, only enter digits (round value if necessary). Do not enter brackets, $ sign, commas, or decimal points) A PART B Ignore your answers to Part A above and instead refer to the original data. Assume that Kesho can outsource the units above the maximum capacity from another company at $175 per unit. What is the change in operating income if Kesho accepts the special order now? (enter as negative number if it is a net loss, only enter digits (round value if necessary). Do not enter brackets, $ sign, commas, or decimal points) AStep by Step Solution
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