question archive Elfalan Corporation produces a single product
Elfalan Corporation produces a single product
Subject:AccountingPrice:3.87 Bought7
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 80,000 units per month is as follows:
Per Unit
Direct materials $ 22.50
Direct labor $ 7.50
Variable manufacturing overhead $ 1.70
Fixed manufacturing overhead $ 19.00
Variable selling & administrative expense $ 2.70
Fixed selling & administrative expense $ 8.60
The normal selling price of the product is $67.80 per unit.
An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.90 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.
1) Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $60.60 per unit. The monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be:
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a) ($4,200) b) $84,300 c) ($15,900) d) $27,300 |
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2) What is the contribution margin per unit on normal sales?
a) $7.20 per unit
b) $33.40 per unit
c) $5.80 per unit
d) $7.70 per unit
