Backyard Living sells its barbecue sets for $170 each.Suppose the company incurs the following average cost per barbecue set:
$$\begin{array} { l l }
\text { Direct materials } & \$ 52 \
\text { Direct labor } & 28 \
\text { Variable manufacturing overhead } & 11 \
\text { Variable selling expenses } & 5 \
\text { Fixed manufarturing overhead* } &\underline{24 }\
\text { Total cost } & \underline{\$ 120}
\end{array}$$ * $ 1,800,000 / 75,000 units
Backyard Living has enough idle capacity to accept a one-time-only special order from Superstore,Inc.for 2,000 barbecue sets at a sales price of $130 per set.Backyard Living will not incur $2 of variable selling expenses for this order.
How would accepting the order affect Backyard Living's operating income?

Question

Backyard Living sells its barbecue sets for $170 each.Suppose the company incurs the following average cost per barbecue set:
 $$\begin{array} { l l } 
\text { Direct materials } & \$ 52 \
\text { Direct labor } & 28 \
\text { Variable manufacturing overhead } & 11 \
\text { Variable selling expenses } & 5 \
\text { Fixed manufarturing overhead* } &\underline{24 }\
\text { Total cost } & \underline{\$ 120}
\end{array}$$ * $ 1,800,000 / 75,000 units
Backyard Living has enough idle capacity to accept a one-time-only special order from Superstore,Inc.for 2,000 barbecue sets at a sales price of $130 per set.Backyard Living will not incur $2 of variable selling expenses for this order.
How would accepting the order affect Backyard Living's operating income?

Quizplus · Accepted Answer

The Answer of Backyard Living sells its barbecue sets for $170 each.Suppose the company incurs the following average cost per barbecue set:
 $$\begin{array} { l l } 
\text { Direct materials } & \$ 52 \
\text { Direct labor } & 28 \
\text { Variable manufacturing overhead } & 11 \
\text { Variable selling expenses } & 5 \
\text { Fixed manufarturing overhead* } &\underline{24 }\
\text { Total cost } & \underline{\$ 120}
\end{array}$$ * $ 1,800,000 / 75,000 units
Backyard Living has enough idle capacity to accept a one-time-only special order from Superstore,Inc.for 2,000 barbecue sets at a sales price of $130 per set.Backyard Living will not incur $2 of variable selling expenses for this order.
How would accepting the order affect Backyard Living's operating income?

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

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