Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

SureLock Manufacturing Company makes and sells several models of locks. The cost records for the ZForce lock show that manufacturing costs total $22.00 per lock.

SureLock Manufacturing Company makes and sells several models of locks. The cost records for the ZForce lock show that manufacturing costs total $22.00 per lock. An analysis of this amount indicates that $12.76 of the total cost has a variable cost behavior pattern, and the remainder is an allocation of fixed manufacturing overhead. The normal selling price of this model is $38.00 per lock. A chain store has offered to buy 12,000 ZForce locks from SureLock at a price of $15.40 each to sell in a market that would not compete with SureLock's regular business. SureLock has manufacturing capacity available and could make these locks without incurring additional fixed manufacturing overhead.

Required:

  1. Calculate the effect on SureLock's operating income of accepting the order from the chain store.
  2. If SureLock's costs had not been classified by cost behavior pattern, is it likely that a correct special order analysis would have been made?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Audit Workbook

Authors: Azhar Ul Haque Sario

1st Edition

B0C9SG1YC6, 979-8851207891

More Books

Students also viewed these Accounting questions

Question

Find examples of tribal consumption or hedonic consumption.

Answered: 1 week ago