Question

GUSTUIU CUMPally pivuutes d Suriyle pruuull dllu lids LdPdlily lo pivuule 100,000 UNTILS per UTILIT. CUSLS LU produce its current sales of 148,000 units follow. The regular selling price of the product is $140 per unit. Management is approached by a new customer who wants to purchase 37,000 units of the product for $78.30 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead and no additional fixed selling and administrative expenses. The customer is not in the company's regular selling territory, so there will be a $7.00 per unit shipping expense in addition to the regular variable selling and administrative expenses. Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses Totals Per Unit $12.50 15.00 11.00 17.50 17.00 14.00 $87.00 Costs at 148,000 Units $ 1,850,000 2,220,000 1,628,000 2,590,000 2,516,000 2,072,000 $ 12,876,000 Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $78.30 per unit.

Answer 1

	Normal Volume	Additional Volume	Combined Total
Sales	$20720000	$2897100	(20720000+2897100)= $23617100
Costs and expenses:
Direct materials	1850000	462500	(1850000+462500)= 2312500
Direct labor	2220000	555000	(2220000+555000)= 2775000
Variable manufacturing overhead	1628000	407000	(1628000+407000)= 2035000
Fixed manufacturing overhead	2590000	-	2590000
Variable selling and administrative expenses	2516000	888000	(2516000+888000)= 3404000
Fixed selling and administrative expenses	2072000	-	2072000
Total costs and expenses	12876000	2312500	15188500
Net income (loss)	$7844000	$584600	$ 8428600

Normal Sales volume= 148000*$140= $20720000

Calculation of Additional Volume

Sales= 37000*$78.30= $2897100

Direct materials= 37000*$12.50= 462500

Direct labor= 37000*$15.00= 555000

Variable manufacturing overhead= 37000*$11.00= $407000

Variable selling and administrative expenses= ($17+7)*37000= $