Question

bandon company sells high end sportswear shirts and reported the results while producing 120,000 units :

Sales =5,100,000

D.material 1,080,000

D.labor 1,320000

M.overhead 1.200,000

Seliing and admin expense 405000

Net income 1,095,000

of the total m.overhead $960000are f. costs.. of the total selling and admin expense above $225000 are f.cost.

in july the company receives a special order for 10000 shirts at $28

1) what is tge amount of selling and admin expense that would be incurredfor the special order?

2) preparean incremental analyse table for if or not to accept the order

3)should brandon accept the ordr?

Answer 1

1

Fixed selling and adminstrative expense=225,000

Variable selling and admin expenditure=405,000-225,000=$180,000

Selling and admin expenditure per unit=180,000/120,000

=$1.5

Selling and administrative expenditure for special order

=10,000*1.5

=$150,000

2

Statement showing calculation of additional income or cost for the special order

	Per unit	Total (10,000)
Sales	$28	$28,000
Direct material	$9	$9,000
Direct labor	$11	$11,000
Selling and adminsitrative	$1.5	$1,500
Total cost	$21.5	$21,500
Additional income		$6,500

Direct material cost per unit=1080000/120000

Direct material cost per unit=9

Direct labor cost per unit=1320000/120,000

Direct labor cost per unit=11

Statement showing icnremental analysis

	Without accepting order	After accepting order	Increase/(Decrease)
Sales	$5,100,000	$5,128,000	$28,000
Direct material	$1,080,000	$1,089,000	$9,000
Direct labor	$1,320,000	$1,331,000	$11,000
Manufacturing overhead	$1,200,000	$1,200,000	0
Selling and administrative expense	$405,000	$406,500	$1,500
Income	$1,095,000	$1,101,500	$6,500

3

There is a increase in the income of $6,500 from the special order and the order should be accepted