Element Boards makes skateboard wheels.Budget information regarding the current period is given below: $\begin{array}{lr}
\text { Revenue }(200,000 \text { wheels at } \$ 3.00 \text { each) } & \$ 600,000 \
\text { Direct materials } & 120,000 \
\text { Direct labor } & 220,000 \
\text { Variable manufacturing overhead } & 50,000 \
\text { Fixed manufacturing overhead } & 70,000
\end{array}$ The USA Skate Team has approached Element with a special order for 6,000 wheels at a price of $2.75 per wheel.Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company's orders.However, Element is operating at capacity and will incur an additional $5,000 in fixed manufacturing overhead if the order is accepted.What is the incremental cost associated with accepting the special order?
A)$16,500
B)$11,700
C)$18,800
D)$16,700

Question

Quizplus · Accepted Answer

The incremental cost associated with accepting the special order includes the variable costs for the additional 6,000 wheels and the additional fixed manufacturing overhead. Variable costs per wheel can be calculated from the given information (direct materials, direct labor, and variable manufacturing overhead) which total to $390,000 for 200,000 wheels, or $1.95 per wheel. For 6,000 wheels, the variable costs would be 6,000 wheels * $1.95 = $11,700. Adding the additional fixed manufacturing overhead of $5,000 gives a total incremental cost of $11,700 + $5,000 = $16,700.

Element Boards Makes Skateboard Wheels The USA Skate Team Has Approached Element with a Special