Problem 23-1A Analysis of income effects of additional business LO A1 Jones Products manufactures and sells to wholesalers approximately 200,000 packages per year of underwater markers at $394 per package. Annual costs for the production and sale of this quantity are shown in the table, Diret water Direct Oushad Selling expenses Minister Tetalustades 116.000 64.000 192.000 10.000 33.000 3645.000 A new wholesaler has offered to buy 33,000 packages for $340 each These markers would be marketed under the wholesaler's name and would not affect Jones Producte" sales through ins normal channels A study of the costs of this additional business reveals the following - Direct materiais costs are 1009 Variable . Por unt direct labor costs for the additional units would be 50% higher than normal because their producton would require overume pay at 1/2 times the usual labor rate. - 20% of the normal annual overhead costs are fixed at any production level from 150.000 to 300.000 units. The remaining 80% of the annual overhead cost is variable with volume Accepting the new business would involve no additional selling expenses. Accepting the new business would increase administrative expenses by a $4,000 fixed amount Direct material: Direct labor Overhead Belling expenses Administrative expenses Total costs and expenses $ 256, 000 64,000 192, 000 80,000 53.000 $ 645.000 A now wholesaler has offered to buy 33,000 packages for $3.40 each. These markers would be marketed under the wholesaler's name and would not affect Jones Products' sales through its normal channels. A study of the costs of this additional business reveals the following: Direct materials costs are 100% variable. Per unin direct labor costs for the additional units would be 50% higher than normal because their production would require overtime pay at 11 times the usual labor rate. 20% of the normal annual overhead costs are fixed at any production level from 150,000 to 300,000 units. The remaining B0% of the annual overhead cost is variable with volume. Accepting the new business would involve no additional selling expenses . Accepting the new business would increase administrative expenses by a $4.000 fixed amount. Required: Complete the three column comparative Income statement that shows the following Mound your intermediate calculations and per unit cost answers to 3 decimal.) 1. Annual operating income without the special order. 2. Annual operating income received from the new business only. 2. Combined annual operating Income from normal business and the new business Per Unitemosants Normal Volume New Business Total New Business Normal Volume Combined Sales Variable costs Food costs Total Per Unit Amounts Normal Volume New Business Normal Volume New Business Combined Sales Variable costs Fixed costs
