Products manufactures? t-shirts. It has the following costs when its production level is 90,000 unit
Products manufactures t-shirts. It has the following costs when its production level is 90,000 units (t-shirts): (SEE ADDITIONAL INFO BELOW) What will happen to Press's operating income if it accepts this special order? Complete the following incremental analysis to determine the impact on Press's operating income if it accepts this special order. (Round all per unit amounts to the nearest cent, $X.XX, and all other amounts to the nearest whole dollar. Enter a “0” for any zero balances. Use parentheses or a minus sign to indicate a decrease in contribution margin and/or operating income from the special order.)
MORE INFO:
The company's relevant range extends to 82,000 units.Relax has received a special order for 7,000 t-shirts at a special price of $33,250 for the entire order. The special order t-shirt would use a fabric that is less expensive than the standard fabric used by Relax, which would allow Relax to save $0.75 per t-shirt in direct materials when manufacturing this special order. Relax has the excess capacity to manufacture this special order. Its total fixed costs will not be impacted by the special order.
DATA TABLE: TOTAL COSTS FOR 70,000 UNITS
DIRECT MATERIALS- $238,000
DIRECT LABOR- $14,000
VARIABLE MANUFACTURING OVERHEAD- $52,500
FIXED MANUFACTURING OVERHEAD $140,000
TOTAL MANUFACTURING COSTS $444.500
Incremental Analysis of Special Sales Order Decision
Per Unit (7,000 units)
Revenue from special order ______ ________
Less variable expense associated with the order:
Direct materials _________ (PER UNIT) ______ (7,000 UNITS)
Direct labor _________ (PER UNIT) ______ (7,000 UNITS)
variable manufacturing overhead _________ (PER UNIT) ______ (7,000 UNITS)
Contribution margin _________ (PER UNIT) ______ (7,000 UNITS)
Less: Additional fixed expenses associated with the order ________ (7,000 UNITS)
Increase (decrease) in operating income from the special order ______ (7,000 UNITS)
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