Calla Company produces skateboards that sell for $51 per unit.The company currently has the capacity to produce 90,000skateboards per year, but is selling 81,800 skateboards per year.Annual costs for 81,800 skateboards follow. Direct materials $842,540 Direct labor 597,140 Overhead 949,000 Selling expenses559,000 Administrative expenses 473,000 Total costs and expenses $3,420,680 A new retail store has offered to buy 8,200 of itsskateboards for $46 per unit. The store is in a different marketfrom Calla's regular customers and would not affect regular sales.A study of its costs in anticipation of this additional businessreveals the following:
*Direct materials and direct labor are 100% variable.
*30 percent of overhead is fixed at any production level from81,800 units to 90,000 units; the remaining 70% of annual overheadcosts are variable with respect to volume.
*Selling expenses are 60% variable with respect to number ofunits sold, and the other 40% of selling expenses are fixed.
*There will be an additional $2.60 per unit selling expense forthis order.
*Administrative expenses would increase by a $860 fixedamount.
Prepare a three-column comparative income statement that reportsthe following:
a. Annual income without the special order.
b. Annual income from the special order.
c. Combined annual income from normal business andthe new business. (Do not round your intermediatecalculations. Round your cost and expenses to nearest wholenumber.)
Calla Company produces skateboards that sell for $51 per unit.The company currently has the capacity to produce 90,000skateboards per year, but is selling 81,800 skateboards per year.Annual costs for 81,800 skateboards follow. Direct materials $842,540 Direct labor 597,140 Overhead 949,000 Selling expenses559,000 Administrative expenses 473,000 Total costs and expenses $3,420,680 A new retail store has offered to buy 8,200 of itsskateboards for $46 per unit. The store is in a different marketfrom Calla's regular customers and would not affect regular sales.A study of its costs in anticipation of this additional businessreveals the following:
*Direct materials and direct labor are 100% variable.
*30 percent of overhead is fixed at any production level from81,800 units to 90,000 units; the remaining 70% of annual overheadcosts are variable with respect to volume.
*Selling expenses are 60% variable with respect to number ofunits sold, and the other 40% of selling expenses are fixed.
*There will be an additional $2.60 per unit selling expense forthis order.
*Administrative expenses would increase by a $860 fixedamount.
Prepare a three-column comparative income statement that reportsthe following:
a. Annual income without the special order.
b. Annual income from the special order.
c. Combined annual income from normal business andthe new business. (Do not round your intermediatecalculations. Round your cost and expenses to nearest wholenumber.)
Related questions
13 A manufacturing company that produces a single product hasprovided the following data concerning its most recent month ofoperations: |
Selling price | $149 |
Units in beginning inventory | 0 |
Units produced | 2,770 |
Units sold | 2,520 |
Units in ending inventory | 250 |
Variable costs per unit: | |
Direct materials | $51 |
Direct labor | $20 |
Variable manufacturing overhead | $10 |
Variable selling and administrative | $12 |
Fixed costs: | |
Fixed manufacturing overhead | $96,950 |
Fixed selling and administrative expenses | $35,280 |
The total gross margin for the month under absorption costingis: |
$83,160
$17,640
$130,320
$141,120
14 A manufacturing company that produces a single product hasprovided the following data concerning its most recent month ofoperations: |
Units in beginning inventory | 0 |
Units produced | 4,750 |
Units sold | 4,650 |
Units in ending inventory | 100 |
Variable costs per unit:
Direct materials | $ | 56 |
Direct labor | $ | 58 |
Variable manufacturing overhead | $ | 21 |
Variable selling and administrative | $ | 19 |
Fixed costs:
Fixed manufacturing overhead | $ | 99,750 |
Fixed selling and administrative | $ | 46,500 |
What is the variable costing unit product cost for the month?
$154 per unit
$175 per unit
$135 per unit
$141 per unit
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15 Bartelt Inc., which produces a single product, has providedthe following data for its most recent month of operations: |
Number of units produced | 4,600 |
Variable costs per unit: | |
Direct materials | $108 |
Direct labor | $105 |
Variable manufacturing overhead | $5 |
Variable selling and administrative expense | $12 |
Fixed costs: | |
Fixed manufacturing overhead | $184,000 |
Fixed selling and administrative expense | $322,000 |
There were no beginning or ending inventories. The absorptioncosting unit product cost was: |
$213 per unit
$258 per unit
$218 per unit
$340 per unit
16 Rehmer Corporation is working on its direct labor budget forthe next two months. Each unit of output requires 0.09 directlabor-hours. The direct labor rate is $8.50 per direct labor-hour.The production budget calls for producing 5,600 units in June and6,100 units in July. |
Required: | ||||||||||||||||||
| Construct the direct labor budget for the next two months,assuming that the direct labor work force is fully adjusted to thetotal direct labor-hours needed each month. (Round youranswers to 2 decimal places.)
|
| Delta Company produces a single product. The cost of producing and selling a single unit of this product at the companyâs normal activity level of 97,200 units per year is: |
| Direct materials | $ | 2.40 | |
| Direct labor | $ | 2.00 | |
| Variable manufacturing overhead | $ | .90 | |
| Fixed manufacturing overhead | $ | 4.55 | |
| Variable selling and administrative expenses | $ | 1.80 | |
| Fixed selling and administrative expenses | $ | 1.00 | |
| The normal selling price is $25 per unit. The companyâs capacity is 109,200 units per year. An order has been received from a mail-order house for 1,000 units at a special price of $22.00 per unit. This order would not affect regular sales.
|
Exercise 12-9 Special Order [LO12-4]
Delta Company produces a single product. The cost of producingand selling a single unit of this product at the companyâs normalactivity level of 91,200 units per year is: |
| Direct materials | $ | 1.80 | |
| Direct labor | $ | 3.00 | |
| Variable manufacturing overhead | $ | .90 | |
| Fixed manufacturing overhead | $ | 4.55 | |
| Variable selling and administrative expenses | $ | 1.80 | |
| Fixed selling and administrative expenses | $ | 2.00 | |
The normal selling price is $24 per unit. The companyâs capacityis 120,000 units per year. An order has been received from amail-order house for 2,400 units at a special price of $21.00 perunit. This order would not affect regular sales. |
| Required: |
| 1. | If the order is accepted, by how much will annual profits beincreased or decreased? (The order will not change the companyâstotal fixed costs.) |
| 2. | Assume the company has 500 units of this product left over fromlast year that are inferior to the current model. The units must besold through regular channels at reduced prices. What unit cost isrelevant for establishing a minimum selling price for these units?(Round your answer to 2 decimal places.) |
