Asked by Angelica Bihasa on Jul 21, 2024
Verified
Assume that Bharu is manufacturing and selling at capacity (5,000 units) .Any special order will mean a loss of regular sales.Under these conditions if the special order from Woolgar Symphony Orchestra is accepted, the financial advantage (disadvantage) Bharu for the year should be:
A) $20,000
B) ($22,000)
C) ($28,000)
D) ($50,000)
Manufacturing Capacity
The total amount of production a manufacturing facility can achieve within a specific period, considering limitations like machinery and labor.
Special Order
A special order is a one-time or unusual request from a customer that can require different pricing, terms, or production considerations compared to standard orders.
Regular Sales
The routine transactions and revenue generated from the normal business operations excluding any extraordinary or non-recurring sales.
- Analyze special order situations and calculate the financial implications of accepting or rejecting them.
- Assess the relevance of different types of costs and revenues in decision-making processes.
Verified Answer
Reference: CH11-Ref16
Elfalan Corporation produces a single product.The cost of producing and selling a single unit of this product at the company's normal activity level of 80,000 units per month is as follows: The normal selling price of the product is $67.80 per unit.
An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price.This order would not change the total amount of the company's fixed costs.The variable selling and administrative expense would be $1.90 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.
Learning Objectives
- Analyze special order situations and calculate the financial implications of accepting or rejecting them.
- Assess the relevance of different types of costs and revenues in decision-making processes.
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