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 3,000 units at a sale price of $45 per product assuming additional fixed manufacturing overhead costs of $5,000 is incurred? (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 3,000 units at a sale price of $45 per product assuming additional fixed manufacturing overhead costs of $5,000 is incurred? (NOTE: Assume regular sales are not affected by the special order. )

Quizplus · Accepted Answer

C)
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 $45.00
Less Mfg.cost per Unit 26.75
= Contribution Margin $18.25
Times units sold × 3,000
Total Contribution Margin =$54,750
Less Add'l Fixed cost - 5,000
Add'l Profit 49,750

Samson Incorporated Provided the Following Information Regarding Its Only Product