Question
Texas Controls Inc. began operations in 20X1 to manufacture a single product. There are no ending work-in-process inventories. Relevant data for the year follow: OPERATING
Texas Controls Inc. began operations in 20X1 to manufacture a single product. There are no ending work-in-process inventories. Relevant data for the year follow:
OPERATING DATA FOR 20X1 | |||
Quantities: | |||
Beginning inventories, finished goods | 0 | ||
Units produced during the year | 5,850 | ||
Units sold during the year | 5,300 | ||
Costs: | |||
Direct materials ($27 per unit) | $ | 157,950 | |
Direct labor ($25 per unit) | 146,250 | ||
Variable factory overhead ($13 per unit) | 76,050 | ||
Fixed factory overhead | 59,000 | ||
Variable selling and administrative expenses ($12 per unit) | 63,600 | ||
Fixed selling and administrative expenses | 78,000 | ||
Selling price for each unit | 112 | ||
Required:
Prepare an income statement for 20X1 using direct costing.
2a. Assume that the company has an opportunity to sell 550 units of the product in a foreign country for $85 per unit. No fixed or variable selling and administrative expenses would be incurred in connection with these units except shipping costs of $11 per unit and miscellaneous administrative expenses of $2 per unit. The company has idle capacity, and the order would not affect present markets. Compute marginal income or loss on order.
2b. Would it be profitable for the company to accept the order?
Analyze: What percentage of the foreign sales order would be realized as marginal income?
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