Accounting Information for Managers Team Project

School: Western University - Course: BUSINESS 081704 - Subject: Accounting

AFM 123 / ARBUS 102 — Accounting Information for Managers Team Project #9 Submission Instructions • see LEARN folder for submission instructions. AFM 123 / ARBUS 102 — Accounting Information for Managerspage 1 of 4

Part 1 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 60,000 units per year is: per unit Direct materials........................................................................$ 5.10 Direct labour.............................................................................$ 3.80 Variable manufacturing overhead...........................................$ 1.00 Fixed manufacturing overhead................................................$ 4.20 Variable selling and administrative expenses..........................$ 1.50 Fixed selling and administrative expenses...............................$ 2.40 The normal selling price is $21 per unit. The company's capacity is 75,000 units per year. An order has been received from a mail-order house for 15,000 units ata special price of $14.00 per unit. This order would not affect regular sales. Requirements: 1.(a) 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.) Show allcomputations. {Hint: To simply and organize in an efficient manner, use a table to analyze your decision similar, but not exactly the same, to the special order tables in Module 14, Chapter 10, page 523 of the textbook, being sure to include all of the relevant/incremental costs and benefits from this particular decision.} (b) Which costs, if any, are not relevant to this particular one-time special order decision? 2.Ignore the one-time special order noted above. Instead, assume the company has 1,000 units of this product leftover and unsold 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 leftover units? Explain. What would be the minimum selling price per unit in this situation?