Samson Incorporated provided the following information regarding its only product:

Assuming there is excess capacity,what would be the effect on operating income of accepting a special order for 5,000 units at a sale price of $40 per product? (NOTE: Assume regular sales are not affected by the special order. )

Question

Samson Incorporated provided the following information regarding its only product:

Assuming there is excess capacity,what would be the effect on operating income of accepting a special order for 5,000 units at a sale price of $40 per product? (NOTE: Assume regular sales are not affected by the special order. )

Quizplus · Accepted Answer

B)
Direct Materials $160,000
Direct Labor 185,000
Variable Mfg.O/H 120,000
Variable Selling 70,000
Total Mfg.Cost $535,000 / units produced 20,000 = $26.75 Mfg.cost per unit
Then
Sales Price $40
Less Mfg.cost per Unit 26.75
= Contribution Margin $13.25
Times units sold × 5,000
Profit = $66,250

Samson Incorporated Provided the Following Information Regarding Its Only Product