Farrow Co. expects to sell 300,000 units of its product in thenext period with the following results.
Sales (300,000 units) $ 4,500,000 Costs and expenses Direct materials 600,000 Direct labor 1,200,000 Overhead 300,000 Selling expenses 450,000 Administrative expenses 771,000 Total costs and expenses 3,321,000 Net income $ 1,179,000
The company has an opportunity to sell 30,000 additional units at$13 per unit. The additional sales would not affect its currentexpected sales. Direct materials and labor costs per unit would bethe same for the additional units as they are for the regularunits. However, the additional volume would create the followingincremental costs: (1) total overhead would increase by 15% and (2)administrative expenses would increase by $129,000.
Calculate the combined total net income if the company accepts theoffer to sell additional units at the reduced price of $13 perunit.
Normal Volume Additional Volume Combined Total Costs andexpenses: Totalcosts and expenses Incremental income(loss) from new business
Farrow Co. expects to sell 300,000 units of its product in thenext period with the following results.
| Sales (300,000 units) | $ | 4,500,000 | |
| Costs and expenses | |||
| Direct materials | 600,000 | ||
| Direct labor | 1,200,000 | ||
| Overhead | 300,000 | ||
| Selling expenses | 450,000 | ||
| Administrative expenses | 771,000 | ||
| Total costs and expenses | 3,321,000 | ||
| Net income | $ | 1,179,000 | |
The company has an opportunity to sell 30,000 additional units at$13 per unit. The additional sales would not affect its currentexpected sales. Direct materials and labor costs per unit would bethe same for the additional units as they are for the regularunits. However, the additional volume would create the followingincremental costs: (1) total overhead would increase by 15% and (2)administrative expenses would increase by $129,000.
Calculate the combined total net income if the company accepts theoffer to sell additional units at the reduced price of $13 perunit.
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Cant find the Normal Volume and NewBusiness for DirectMaterials, Direct Labor and Variable overhead, Contribution Marginalso
Jones Products manufactures and sells to wholesalersapproximately 200,000 packages per year of underwater markers at$3.88 per package. Annual costs for the production and sale of thisquantity are shown in the table.
| Direct materials | $ | 256,000 | |
| Direct labor | 64,000 | ||
| Overhead | 192,000 | ||
| Selling expenses | 80,000 | ||
| Administrative expenses | 53,000 | ||
| Total costs and expenses | $ | 645,000 | |
A new wholesaler has offered to buy 33,000 packages for $3.31 each.These markers would be marketed under the wholesalerâs name andwould not affect Jones Productsâ sales through its normal channels.A study of the costs of this additional business reveals thefollowing:
Direct materials costs are 100% variable.
Per unit direct labor costs for the additional units would be50% higher than normal because their production would requireovertime pay at 1½ times the usual labor rate.
30% of the normal annual overhead costs are fixed at anyproduction level from 150,000 to 300,000 units. The remaining 70%of the annual overhead cost is variable with volume.
Accepting the new business would involve no additional sellingexpenses.
Accepting the new business would increase administrativeexpenses by a $4,000 fixed amount.
Required:
Complete the three-column comparative income statement that showsthe following (Round your intermediate calculations and perunit cost answers to 3 decimals)
1. Annual operating income without the specialorder.
2. Annual operating income received from the newbusiness only.
3. Combined annual operating income from normalbusiness and the new business.
