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Unformatted text preview: 15-615-18 Incremental costs to fill the order for 700 toasters:Direct materials cost 700 x $6.50 = $ 4,550Direct labor cost 700 x 5.75 = 4,025Variable overhead cost 700 x 4.25 = 2,975Packing cost 700 x 0.75 = 525Total incremental cost $12,075Note that no additional (incremental) fixed overhead costs would beincurred because of filling the order. Also the company would notincur the variable selling costs ($1.50 per unit) normally incurred toobtain and fill orders for local customers.Sales $12,000Incremental costs (12,075)Decrease in profit $ (75)Happy Apparati should not accept the offer. Note that the $40,000 costof advertising in the international trade magazine was incurred priorto the time of the decision. Thus, it is a "sunk" cost and is notrelevant in the decision whether or not to accept the offer from theBrazilian Company....
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This note was uploaded on 04/08/2008 for the course ACC 102 taught by Professor Drucker during the Fall '07 term at Coastal Carolina University.
- Fall '07