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PROBLEM 6 - income will increase by $31,000(c Unit selling...

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PROBLEM 6-1A (a) Reject Order Accept Order Net Income Increase (Decrease) Revenues (10,000 X $28) Cost of goods sold Selling and administrative expenses Net income $0 0 0 $0 $280,000 224,000 25,000 $ 31,000 (1) (2) $280,000 ( (224,000) ( (25,000 ) $ 31,000 (1) Variable costs = $3,600,000 – $1,080,000 = $2,520,000; $2,520,000 ÷ 112,500 units = $22.40 per unit; 10,000 X $22.40 = $224,000. (2) Variable costs = $450,000 – $225,000 = $225,000; $225,000 ÷ 112,500 units = $2.00 per unit; 10,000 X ($2.00 + $0.50) = $25,000. (b) Yes, the special order should be accepted because net
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Unformatted text preview: income will increase by $31,000. (c) Unit selling price = $22.40 (variable manufacturing costs) + $2.50 variable selling and administrative expenses + $4.10 net income = $29. (d) Nonfinancial factors to be considered are: (1) possible effect on domestic sales, (2) possible alternative uses of the unused plant capacity, and (3) ability to meet customer’s schedule for delivery without increasing costs....
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