Grill Time sells its barbecue sets for $170 each. Suppose the company incurs the following average cost per barbecue set:
$$\begin{array} { l l }
\text { Direct materials } & \$ 52 \
\text { Direct labor } & 28 \
\text { Variable manufacturing overhead } & 11 \
\text { Variable selling expenses } & 5 \
\text { Fixed manufarturing overhead* } & \mathbf { 2 4 } \
\text { Total cost } & \$ 120
\end{array}$$ * $ 1,800,000 / 75,000 units
Grill Time has enough idle capacity to accept a one-time-only special order from Backyard Living, Inc. for 2,000 barbecue sets at a sales price of $130 per set. Grill Time will not incur $2 of variable selling expenses for this order.
How would accepting the order affect Grill Time's operating income?

Question

Grill Time sells its barbecue sets for $170 each. Suppose the company incurs the following average cost per barbecue set:
 $$\begin{array} { l l } 
\text { Direct materials } & \$ 52 \
\text { Direct labor } & 28 \
\text { Variable manufacturing overhead } & 11 \
\text { Variable selling expenses } & 5 \
\text { Fixed manufarturing overhead* } & \mathbf { 2 4 } \
\text { Total cost } & \$ 120
\end{array}$$ * $ 1,800,000 / 75,000 units
Grill Time has enough idle capacity to accept a one-time-only special order from Backyard Living, Inc. for 2,000 barbecue sets at a sales price of $130 per set. Grill Time will not incur $2 of variable selling expenses for this order.
How would accepting the order affect Grill Time's operating income?

Quizplus · Accepted Answer

The Answer of Grill Time sells its barbecue sets for $170 each. Suppose the company incurs the following average cost per barbecue set:
 $$\begin{array} { l l } 
\text { Direct materials } & \$ 52 \
\text { Direct labor } & 28 \
\text { Variable manufacturing overhead } & 11 \
\text { Variable selling expenses } & 5 \
\text { Fixed manufarturing overhead* } & \mathbf { 2 4 } \
\text { Total cost } & \$ 120
\end{array}$$ * $ 1,800,000 / 75,000 units
Grill Time has enough idle capacity to accept a one-time-only special order from Backyard Living, Inc. for 2,000 barbecue sets at a sales price of $130 per set. Grill Time will not incur $2 of variable selling expenses for this order.
How would accepting the order affect Grill Time's operating income?

Grill Time Sells Its Barbecue Sets for $170 Each * $ 1,800,000 / 75,000 Units Grill Time Has Enough

Grill Time Sells Its Barbecue Sets for $170 Each * $ 1,800,000 / 75,000 Units
Grill Time Has Enough