Delta Company produces a single product. The cost of producing and selling a single unit of...

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Delta Company produces a single product. The cost of producingand selling a single unit of this product at the company’s normalactivity level of 92,400 units per year is: Direct materials $ 1.90Direct labor $ 3.00 Variable manufacturing overhead $ 0.70 Fixedmanufacturing overhead $ 5.25 Variable selling and administrativeexpenses $ 2.00 Fixed selling and administrative expenses $ 2.00The normal selling price is $25.00 per unit. The company’s capacityis 124,800 units per year. An order has been received from amail-order house for 2,700 units at a special price of $22.00 perunit. This order would not affect regular sales or the company’stotal fixed costs. Required: 1. What is the financial advantage(disadvantage) of accepting the special order? 2. As a separatematter from the special order, assume the company’s inventoryincludes 1,000 units of this product that were produced last yearand that are inferior to the current model. The units must be soldthrough regular channels at reduced prices. What unit cost isrelevant for establishing a minimum selling price for theseunits?

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Answer 1 Calculation of Increase in Profits if Special Order is Accepted Incremental Sales 2700 Units X 22 59400 Incremental Cost Direct Material See Answer

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Delta Company produces a single product. The cost of producingand selling a single unit of this product at the company’s normalactivity level of 92,400 units per year is: Direct materials $ 1.90Direct labor $ 3.00 Variable manufacturing overhead $ 0.70 Fixedmanufacturing overhead $ 5.25 Variable selling and administrativeexpenses $ 2.00 Fixed selling and administrative expenses $ 2.00The normal selling price is $25.00 per unit. The company’s capacityis 124,800 units per year. An order has been received from amail-order house for 2,700 units at a special price of $22.00 perunit. This order would not affect regular sales or the company’stotal fixed costs. Required: 1. What is the financial advantage(disadvantage) of accepting the special order? 2. As a separatematter from the special order, assume the company’s inventoryincludes 1,000 units of this product that were produced last yearand that are inferior to the current model. The units must be soldthrough regular channels at reduced prices. What unit cost isrelevant for establishing a minimum selling price for theseunits?