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.
Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $60.60 per unit. The monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be:
A) ($4,200)
B) $84,300
C) ($15,900)
D) $27,300

Question

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.
Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $60.60 per unit. The monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be:
A) ($4,200) 
B) $84,300 
C) ($15,900) 
D) $27,300

Quizplus · Accepted Answer

11eacbfc_c646_3b64_8ffe_73f56dc3b06d_TB7552_00

Elfalan Corporation Produces a Single Product