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Troyanec [42]
2 years ago
13

Goshford Company produces a single product and has capacity to produce 105,000 units per month. Costs to produce its current sal

es of 84,000 units follow. The regular selling price of the product is $126 per unit. Management is approached by a new customer who wants to purchase 21,000 units of the product for $77.40 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead and no additional fixed selling and administrative expenses. The customer is not in the company’s regular selling territory, so there will be a $7.60 per unit shipping expense in addition to the regular variable selling and administrative expenses. Per Unit Costs at 84,000 Units Direct materials $ 12.50 $ 1,050,000 Direct labor 15.00 1,260,000 Variable manufacturing overhead 14.00 1,176,000 Fixed manufacturing overhead 17.50 1,470,000 Variable selling and administrative expenses 14.00 1,176,000 Fixed selling and administrative expenses 13.00 1,092,000 Totals $ 86.00 $ 7,224,000 Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $77.40 per unit.
Business
1 answer:
Salsk061 [2.6K]2 years ago
6 0

Answer:

Net income= $4,836,200

Explanation:

Giving the following information:

Offer:

21,000 units for $77.4

An increase in variable cost= $7.6 per unit

Direct materials $ 12.50 $ 1,050,000

Direct labor 15.00 1,260,000

Variable manufacturing overhead 14.00 1,176,000

Fixed manufacturing overhead 17.50 1,470,000

Variable selling and administrative expenses 14.00 1,176,000

Fixed selling and administrative expenses 13.00 1,092,000

Totals $ 86.00 $ 7,224,000

First, we need to calculate the effect on the income of accepting the offer:

Effect on income= 21,000*77.4 - 21,000*(12.5 + 15 + 14 + 14 + 7.6)

Effect on income= 1,625,400 - 1,325,100

Effect on income= 300,300

Net income= 84,000*140 + 300,300 - 7,224,000

Net income= $4,836,200

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2 years ago
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Answer:

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$105,000 (B)

Explanation:

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Next, you have to know what interest capitalization is; Interest capitalization is the accumulated interest on on borrowed amount for construction assets that are for future use.

Next, we nee to know what Capitalization period is; it is the period during which interest costs are incurred on amounts spent to construct an asset in progress. Interests are capitalized during construction until the asset is ready for its intended use. For the purpose of calculation, it is represented as the period of time for which the depth will be incurred over the construction year. for example for a year starting in January 1 to December 31, if $200,000 was borrowed, the capitalization period will be represented as "12/12" meaning that the incurred debt was owed for 12 out of 12 monts, if the same amount was borrowed in May, capitalization period will be represented as "8/12"meaning that the interest was owed for 8 out of 12 months. Now, for our example, the construction year began on April 1 and ended on December 31 (8 months), hence the capitalization periods for the amount taken in April one is "8/8", for July 1 is "5/8" and October 1 is "2/8", meaning that in October the debt was incurred for 2 out of 8 months.

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Hence the WAAE is calculated as Actual Expenditure ×  Capitalization Period which is written thus:

                       

Date          Actual Expenditure          Capitalization period        WAAE

April 1         $30,000                                   8/8                            $30,000

July 1          $60,000                                   5/8                            $37,500

October 1   $ 150,000                                 2/8                           $37,500

Total                                                                                              $105,000

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