Mcniff Corporation makes a range of products. The company's predetermined overhead rate is $28 per direct labor-hour, which was calculated using the following budgeted data: Variable manufacturing overhead$180,000Fixed manufacturing overhead$380,000Direct labor-hours 20,000Management is considering a special order for 200 units of product O96S at $122 each. The normal selling price of product O96S is $149 and the unit product cost is determined as follows: Direct materials$67.00?Direct labor 32.00?Manufacturing overhead applied 44.80?Unit product cost$ 143.80?If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. Assume that direct labor is a variable
cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.Required:The financial advantage (disadvantage) for the company as a result of accepting this special order would be:
What will be an ideal response?
Direct materials, direct labor, and variable manufacturing overhead are relevant in this decision. Fixed manufacturing overhead is not relevant because it would not be affected by the decision. The variable portion of the manufacturing overhead rate is computed as follows:
| Variable manufacturing overhead | $ | 180,000 |
| ÷ Direct labor-hours | 20,000 | |
| = Variable portion of the predetermined overhead rate | $ | 9.00 |
| Manufacturing overhead applied | $ | 44.80 |
| ÷ Predetermined overhead rate | $ | 28.00 |
| = Direct labor-hours | 1.60 |
| Variable portion of the predetermined overhead rate | $ | 9.00 |
| × Direct labor-hours | 1.60 | |
| = Variable manufacturing overhead | $ | 14.40 |
| Special order price | $ | 122.00 | |
| Variable costs: | |||
| Direct materials | 67.00 | ||
| Direct labor | 32.00 | ||
| Variable manufacturing overhead | 14.40 | ||
| Total variable cost | 113.40 | ||
| Contribution margin | $ | 8.60 | |
| × Units ordered | 200 | ||
| = Total increase in profit from the special order | $ | 1,720 | |
You might also like to view...
Michelin's ________ can be summed up as "providing safety-conscious parents greater security in tires at a premium price."
A. mission statement B. core values C. customer value proposition D. protocol E. marketing program
As human resources manager for Diamond Logistics & Shipping, Lauren has just hired three new employees, Juana, Keiko, and Arjun. Each new employee comes from a different minority background. Her best strategy for introducing them to the rest of the workforce is to
A. let the rest of the employees know that she has hired Juana, Keiko, and Arjun in compliance with company objectives for managing diversity. B. put on a meet-and-greet event in which she introduces Juana, Keiko, and Arjun formally, using the opportunity as a seminar on diversity in the workplace. C. emphasize the cultural differences between the new hires and the rest of the employees in hopes of opening a dialogue on race and ethnicity. D. work toward breaking down barriers by remaining ever vigilant for any hint that the existing employees have failed to welcome Juana, Keiko, and Arjun with open arms. E. allow each of them to adapt on his or her own, all the while quietly observing from the background and making it clear that she is there if they need help with anything.
A neighborhood shopping center has from 50 to more than 100 stores
Indicate whether the statement is true or false
What crimes do not require mens rea?
A) felonies B) strict liability crimes C) street crimes D) petty crimes