Pilgrim Corporation makes a range of products.The company's predetermined overhead rate is $23 per direct labor-hour, which was calculated using the following budgeted data: Management is considering a special order for 800 units of product N89E at $69 each.The normal selling price of product N89E is $88 and the unit product cost is determined as follows: If the special order were accepted, normal sales of this and other products would not be affected.The company has ample excess capacity to produce the additional units.Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.
Required:
If the special order were accepted, what would be the impact on the company's overall profit?

Question

Pilgrim Corporation makes a range of products.The company's predetermined overhead rate is $23 per direct labor-hour, which was calculated using the following budgeted data:  Management is considering a special order for 800 units of product N89E at $69 each.The normal selling price of product N89E is $88 and the unit product cost is determined as follows:  If the special order were accepted, normal sales of this and other products would not be affected.The company has ample excess capacity to produce the additional units.Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.
Required:
If the special order were accepted, what would be the impact on the company's overall profit?

Quizplus · Accepted Answer

The Answer of Pilgrim Corporation makes a range of products.The company's predetermined overhead rate is $23 per direct labor-hour, which was calculated using the following budgeted data:  Management is considering a special order for 800 units of product N89E at $69 each.The normal selling price of product N89E is $88 and the unit product cost is determined as follows:  If the special order were accepted, normal sales of this and other products would not be affected.The company has ample excess capacity to produce the additional units.Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.
Required:
If the special order were accepted, what would be the impact on the company's overall profit?

Pilgrim Corporation Makes a Range of Products