Question

Cant find the Normal Volume and NewBusiness for Direct Materials, Direct Labor and Variable overhead, Contribution Margin also

Jones Products manufactures and sells to wholesalers approximately 200,000 packages per year of underwater markers at $3.88 per package. Annual costs for the production and sale of this quantity are shown in the table.

Direct materials	$	256,000
Direct labor		64,000
Overhead		192,000
Selling expenses		80,000
Administrative expenses		53,000
Total costs and expenses	$	645,000

A new wholesaler has offered to buy 33,000 packages for $3.31 each. These markers would be marketed under the wholesaler’s name and would not affect Jones Products’ sales through its normal channels. A study of the costs of this additional business reveals the following:

Direct materials costs are 100% variable.

Per unit direct labor costs for the additional units would be 50% higher than normal because their production would require overtime pay at 1½ times the usual labor rate.

30% of the normal annual overhead costs are fixed at any production level from 150,000 to 300,000 units. The remaining 70% of the annual overhead cost is variable with volume.

Accepting the new business would involve no additional selling expenses.

Accepting the new business would increase administrative expenses by a $4,000 fixed amount.

Required:
Complete the three-column comparative income statement that shows the following (Round your intermediate calculations and per unit cost answers to 3 decimals)

1. Annual operating income without the special order.
2. Annual operating income received from the new business only.
3. Combined annual operating income from normal business and the new business.

Answer 1

Annual operating income without the special order
Particulars	Amount ($)	Amount ($)
Sales (200000 x 3.88)	776,000.00
Less: Total costs and expenses	645,000.00
Annual operating income without the special order		131,000.00
Annual operating income received from new business only
Particulars	Amount ($)	Amount ($)
Sales (33000 x 3.31)		109,230.00
Less: Expenses
Direct materials ( Note 1)	42,240.00
Direct labour (Note 2)	15,840.00
Overhead (Note 3)	22,176.00
Selling expenses	-
Administrative expenses	4,000.00
Total costs and expenses		84,256.00
Annual operating income received from new business only		24,974.00
Combined annual operating income from normal and new business
Particulars	Amount ($)	Amount ($)
Annual operating income without the special order	131,000.00
Add: Annual operating income received from new business only	24,974.00
Combined annual operating income from normal and new business		155,974.00

Particulars	Amount ($)
Note 1
Direct materials for 200000 units	256,000.00
Direct materials for 33000 (256000 x 33000/200000)	42,240.00
Note 2:
Direct labour	64,000.00
Units	200,000.00
Per unit costs (64000/200000)	0.32
For 33000 units:
Each unit (0.32 x 1.5)	0.48
For 33000 units (33000 x 0.48)	15,840.00

Note 3:
Overhead	192,000.00
Fixed portion (192000 x 30%)	57,600.00
Variable portion (192000 x 70%)	134,400.00
Overhead for 33000 (134400 x 33000/200000)	22,176.00