Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 50

Special Order; ABC Costing (Continuation of Problem 11-48) Assume the same information as for Problem 11-48, except that the $12 fixed manufacturing overhead consists of $8 per unit batch related costs and $4 per unit facilities level fixed costs. Also, assume that each new batch causes increased costs of $5,000 per batch; the remainder of the batch level costs consists of tools and supervision labor that do not vary with the number of batches. The remainder of fixed costs do not vary with the number of units produced or the number of batches.

Required

1. Calculate the relevant unit and total cost of the special order, including the new information about batch related costs.

---

2. If accepted, how would the special order affect GGI’s operating income?

Step 1 of 6

4108-11-49P AID: 60589 | 11/09/2019