Asked by Cashmere Wilson on Jul 09, 2024
Verified
Gallerani Corporation has received a request for a special order of 6,000 units of product A90 for $21.20 each.Product A90's unit product cost is $16.20, determined as follows: Assume that direct labor is a variable cost.The special order would have no effect on the company's total fixed manufacturing overhead costs.The customer would like modifications made to product A90 that would increase the variable costs by $4.20 per unit and that would require an investment of $21,000 in special molds that would have no salvage value.This special order would have no effect on the company's other sales.The company has ample spare capacity for producing the special order.The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be:
A) $(18,600)
B) $(16,200)
C) $30,000
D) $5,400
Special Molds
Custom-designed molds used in manufacturing processes to produce unique product shapes or designs.
Variable Costs
Expenses that change in proportion to the activity of a business, such as the cost of raw materials used in production.
Unit Product Cost
The cost associated with producing a single unit of a product, including all direct and indirect costs.
- Analyze the financial impact of introducing a new product or accepting a special order.
Verified Answer
Learning Objectives
- Analyze the financial impact of introducing a new product or accepting a special order.
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