question archive Special order decision: Holiday Products manufactures a single product with the following costs at a volume of 2,000 units: Product Costs Direct materials$ 450 Direct labor180 Manufacturing overhead *300 Selling expenses (50% variable) 150 Administrative expenses ** 140 Total per unit$1,220 *Note that per unit manufacturing overhead costs include $420,000 fixed costs **Note that per unit administrative expenses include $250,000 fixed costs
Special order decision: Holiday Products manufactures a single product with the following costs at a volume of 2,000 units: Product Costs Direct materials$ 450 Direct labor180 Manufacturing overhead *300 Selling expenses (50% variable) 150 Administrative expenses ** 140 Total per unit$1,220 *Note that per unit manufacturing overhead costs include $420,000 fixed costs **Note that per unit administrative expenses include $250,000 fixed costs
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Special order decision: Holiday Products manufactures a single product with the following costs at a volume of 2,000 units:
Product Costs
Direct materials$ 450
Direct labor180
Manufacturing overhead *300
Selling expenses (50% variable) 150
Administrative expenses ** 140
Total per unit$1,220
*Note that per unit manufacturing overhead costs include $420,000 fixed costs
**Note that per unit administrative expenses include $250,000 fixed costs.
Holiday currently sells its product to dealers for $1,400 per unit.
A company recently approached Holiday's management about buying 400 units of product for a price of $1,100 per unit. Capacity is sufficient to produce the extra 400 units. No selling expenses would be incurred on the special order.
What is the total incremental profit or loss if Holiday accepts the special order?
Answers:a. $48,000 loss
b. $68,000 profit
c. $12,000 profit
d. $116,000 profit
e. $146,000 profit
f. $440,000
g. None of these choices is correct.
