Pilgrim Corporation makes a range of products. The company's predetermined overhead rate is $23 per direct labor-hour, which was calculated using the following budgeted data: Management is considering a special order for 800 units of product N89E at $69 each. The normal selling price of product N89E is $88 and the unit product cost is determined as follows: If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.
Required:
If the special order were accepted, what would be the impact on the company's overall profit?

Question

Pilgrim Corporation makes a range of products. The company's predetermined overhead rate is $23 per direct labor-hour, which was calculated using the following budgeted data:  Management is considering a special order for 800 units of product N89E at $69 each. The normal selling price of product N89E is $88 and the unit product cost is determined as follows:  If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.
Required:
If the special order were accepted, what would be the impact on the company's overall profit?

Quizplus · Accepted Answer

The Answer of Pilgrim Corporation makes a range of products. The company's predetermined overhead rate is $23 per direct labor-hour, which was calculated using the following budgeted data:  Management is considering a special order for 800 units of product N89E at $69 each. The normal selling price of product N89E is $88 and the unit product cost is determined as follows:  If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.
Required:
If the special order were accepted, what would be the impact on the company's overall profit?

Pilgrim Corporation Makes a Range of Products