Given the following data for Tan Company Sales (in units) 60,000 Selling price per unit 28...
Given the following data for Tan Company
Sales (in units) 60,000
Selling price per unit 28
Manufacturing costs per unit:
Materials 5
Direct labor 4
Overhead
Variable 4
Fixed 10
Total 23
Gross margin 5
Selling and admin. Expenses per unit 2
Operating income 3
A Company in a foregin market offer to buy and the offer specifies the following data
Units to be sold 10,000
Price per unit 13.10
What is the logical decision about this special offer
-
Do not reject the special offer
-
Reject the special offer
-
Indifferent to reaction, not the special offer
-
Always accept the offer
Homework Answers
Variable cost per unit = direct materials + direct labor + variable overhead + selling and administrative expense
= 5+4+4+2
= $15
Price per unit in Foregin market = $13.10
Since the price per unit in the special offer is less than variable cost per unit, hence special order should be rejected.
Fixed overhead is not relevant here since fixed overhead will not increase due to the acceptance of special order.
Second option is correct option.
Kindly comment if you need further assistance. Thanks‼!
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Given the following data for Tan Company
Sales (in units) 60,000
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