Reference no: EM132633282
The HASF Company has an annual plant capacity of 50,000 units. Predicted data on sales and costs are given below.
Sales (50 per unit) 1,000,000
Manufacturing cost
Variable (material labor and overhead) 40 per unit
Fixed overhead 30,000
Selling and administrative expenses
Variable (sales commission RS 0.5 per unit) 2 per unit
Fixed 7,000
A special order has been received from outside for 5,000 units at a selling price of 45 per unit this order will no effect on regular sales. The usual sales commission on this order will be reduced by one half.
Required:
Question a. Should the company accept / reject the order?
Keeping in view the above answer narrate rationale to support your answer Second Part. The estimated costs of producing 6,000 units of a component are:
Per Unit
Direct Material $10
Direct Labor 8
Applied Variable Factory Overhead 9
Applied Fixed Factory Overhead 12
$1.5 per direct labor dollar
The same component can be purchased from market at a price of $29 per unit. If the component is purchased from market, 25% of the fixed factory overhead will be saved.
Required:
Question b. Should the component be purchased from the market?
Question c. Being a production manager, provide your logical opinion on choosing between purchasing the component from market or producing in-house
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