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 1,200 units at a sale price of $47 per product? The 1,200 units would not require any variable selling and administrative expenses.(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 1,200 units at a sale price of $47 per product? The 1,200 units would not require any variable selling and administrative expenses.(NOTE: Assume regular sales are not affected by the special order. )

Quizplus · Accepted Answer

D)
Direct Materials $160,000
Direct Labor 185,000
Variable Mfg.O/H 120,000
Variable Selling 70,000
Total Mfg.Cost $465,000 / units produced 20,000 = $23.25 Mfg.cost per unit
Then
Sales Price $47
Less Mfg.cost per Unit 23.25
= Contribution Margin $23.75
Times units sold × 1,200
Profit = $28,500

Samson Incorporated Provided the Following Information Regarding Its Only Product