Reference no: EM132524694

REQUIRED

Question 1: Use the information given below to calculate the expected total profit or loss from the special order.

INFORMATION

A company produces a single product called "Choc". The normal selling price is R45 and the unit manufacturing costs are as follows:

Direct materials 18

Direct labour 9

Overheads 9

• 50% of the manufacturing overheads are variable. A sales commission of 5% applies to sales at the normal selling price only. Administrative costs are fixed and amount to R38 250 per month. The monthly production capacity is 33 000 units. The sales level for the past few months has been at a steady level of 27 000 units per month.

• A special order for 5 500 units of Choc at a price of R40 each has been received. The products have to be delivered to this customer at a cost of R7.50 per unit.