Question
Q1 Xenon Company manufactures 10,000 special gears for use in its annual production activities. The following costs are reported: Direct materials, $3/gear Direct labor, $4/gear
Q1
Xenon Company manufactures 10,000 special gears for use in its annual production activities. The following costs are reported:
Direct materials, $3/gear
Direct labor, $4/gear
Variable Factory Overhead, $4.5/gear
Fixed Factory Overhead, $70,000
Parts Plus has offered to sell Xenon 10,000 of these gears for $17 per unit. If Xenon accepts the offer, $40,000 of the fixed factory overhead to special gears would be totally eliminated. What would be the effect on Xenon's income of accepting Parts Plus's offer?
Question 2 (1 point)
Zurich Inc. has determined the following cost data:
Variable Manufacturing, $15/unit
Fixed Manufacturing,$36,000
Variable Selling, $ 1/unit
Fixed Selling & Administrative, $18,000
The normal selling price is $25 per unit. The company has an opportunity to bid on a one-time only sale of 1,000 units. The variable selling costs would be replaced by a bulk shipping charge of $500. If excess capacity exists, and this order would not disturb regular sales, what would be the company's incremental cost per unit of accepting this special offer?
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