Question

Tunnel Incorporated provided the following information regarding its single​ product: Direct materials used $ 210 comma 000 Direct labor incurred $ 470 comma 000 Variable manufacturing overhead $ 120 comma 000 Fixed manufacturing overhead ​$100,000 Variable selling and administrative expenses $ 55 comma 000 Fixed selling and administrative expenses ​$20,000 The regular selling price for the product is​ $80. The annual quantity of units produced and sold is 43 comma 000 units​ (the costs above relate to the 43 comma 000 units production​ level). The company has excess capacity and regular sales will not be affected by this special order. There was no beginning inventory. What would be the effect on operating income of accepting a special order for 1 comma 440 units at a sale price of $ 41 per​ product? The special order units would not require any variable selling and administrative expenses.​ (Round any intermediary calculations to the nearest cent. Round your final answer to the nearest​ dollar.)

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Direct materials used $ 210,000 Direct labor incurred $ 470,000 Variable manufacturing overhead $ 120,000

Variable selling and administrative expenses $ 55,000

The annual quantity of units produced and sold is 43,000 units

Unitary cost= (210,000 + 470,000 + 120,000 + 55,000)/43,000= 19.88

Because it is a special offer and there is unused capacity we will not have into account the fixed costs.

Units= 1,440 units

Selling price= $41

Effect on income= (41 - 19.88)*1440= $30,412.8