Homework Answers
Out of manufacturing overhead of $300 per unit, $150 is variable and $150 is fixed.
Fixed manufacturing overhead will not be effected due to the acceptance of the special order. Hence, it is irrelevant in deciding whether to accept the special order or not.
Analysis of special order
| Sales revenue | 9,000 |
| Less: Expenses | |
| Direct materials (10 x 250) | - 2,500 |
| Direct labor (10 x 350) | - 3,500 |
| Variable manufacturing overheads (10 x 150) | - 1,500 |
| Shipping costs (10 x 150) | - 1,500 |
| Rent of special machine | - 1,500 |
| Net loss | - $1,500 |
Special order should not be accepted since it will result in a loss of $1,500
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