Haley Company produces one product and has the capacity to make 150,000 units per month. The...

Haley Company produces one product and has the capacity to make 150,000 units per month. The cost that is associated with producing 125,000 units is shown below:

Account	Per Unit	Cost at 125,000 units
Direct Materials	$ 20.00	$2,500,000.00
Direct Labor	$ 30.00	$3,750,000.00
Variable Manufacturing overhead	$ 10.00	$1,250,000.00
Fixed Manufacturing overhead	$ 15.00	$1,875,000.00
Variable selling and administrative expenses	$ 12.00	$1,500,000.00
Fixed selling and administrative expenses	$ 14.00	$1,750,000.00
Totals	$ 101.00	$12,625,000.00

The selling price per unit is $150. The Haley company was contacted by a prospective customer interested in purchasing 25,000 units for $100. The management team is considering this offer and in the meeting about this new prospect, you (the management accountant), stated that the fixed cost will remain the same, but the variable cost will increase along with $10 shipping expense due to the customer’s international location. Management has asked you to determine if they should accept or reject the new customer proposal and what nonmonetary factors should be considered.

Account	Per Unit	Cost at 125,000 units
Direct Materials	$ 20.00	$2,500,000.00
Direct Labor	$ 30.00	$3,750,000.00
Variable Manufacturing overhead	$ 10.00	$1,250,000.00
Fixed Manufacturingoverhead	$ 15.00	$1,875,000.00
Variable selling and adminidtrative expenses	$ 12.00	$1,500,000.00
Fixed selling and administrative expenses	$ 14.00	$1,750,000.00
Totals	$101.00	$12,625,000.00

Accounts	Normal Volume	Additional volume	Combined Total
Sales
Cost and Expenses:
Direct Materials
Direct Labor
Variable Overhead
Fixed Overhead
Variable Selling and Admin exp.
Fixed selling and Admin exp.
Total costs and expenses:
Net Income	$ -	$ -	$ -

Expert Solution

ekkarill92 answered 2 hours ago

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