DATA INPUT
Direct material 7.50$ Sales Commission 5%
Direct labor 9.00$ Freight Expense 1.50$
Manufacturing Overhead 13.50$ Markup 40%
Total Product Cost 30.00$ Selling Price 42$
Manufacturing overhead is applied per standard direct-labor hour at the following rate:
Add’l Fixed Overhead
18,000$ (per month)
Variable manufacturing overhead 9.00$
Fixed manufacturing overhead (traceable) 12.00$ Glasgow Order
Fixed manufacturing overhead (allocated) 6.00$ Total Units 120,000
Applied Manufacturing Overhead 27.00$ Per Month 30,000
Glasgow Price 28.50$
SOLUTION
2.
The analysis of accepting the Glasgow Industries order of 120,000 units is as follows:
Totals for
Per Unit 120000 units
Incremental Costs:
Variable Costs:
Direct Material 8$ 900,000$
Direct Labor 9$ 1,080,000$
Variable Overhead 5$ 540,000$
Total Variable Costs 21$ 2,520,000$
Fixed Overhead:
Supervisory and clerical costs
(4 months @ $18000) 72,000$
–
Total Incremental Costs 2,592,000$
Total Incremental Profits 828,000$
3.
Direct Material 7.50$
Direct Labor 9.00$
Variable Overhead 4.50$ 21.00$
Additional Fixed Cost ($72000/120000) 0.60$
Minimum Unit Price 21.60$
Incremental Revenue 29$ 3,420,000$