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PROBLEM 6

# 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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