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Bizhelp, Accountant
Category: Business and Finance Homework
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Experience:  BA degree and Certified Public Accountant
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Delta Company produces a single product. The cost of producing

Resolved Question:

Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 8,000 units per year is:

Direct materials $3.00
Direct labor $3.00
Variable manufacturing overhead $1.00
Fixed manufacturing overhead $3.95
Variable selling and administrative expense $1.10
Fixed selling and administrative expense $2.00

The normal selling price is $19 per unit. The company's capacity is 11,000 units per year. An order has been received from a mail-order house for 3,000 units at a special price of $9 per unit. This order would not affect regular sales.

Requirement 1:

If the order is accepted, by how much will annual profits be increased or decreased? (The order will not change the company's total fixed costs.)

Profits would decrease or increase by $

Assume the company has 1,000 units of this product left over from last year that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units?

Relevant cost is what?
Submitted: 5 years ago.
Category: Business and Finance Homework
Expert:  Bizhelp replied 5 years ago.

Thanks for the question.

Please click here for the solution.

Hope this helps!
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