What are relevant costs and benefits of this special order

Assignment Help Accounting Basics
Reference no: EM133093165

Question - Costa Chemicals Company produces and sells its only product MP-200 that is used to manufacture other products. A company from Mexico has approached Costa to purchase 20,000 units of MP-200 for $14.00 each. Selling to Mexico will not affect the company's other customers in Canada. Costa's production capacity is 140,000 units per year but can only sell 120,000 units to regular customers. Exporting the product to Mexico will require a further packaging cost of $0.35 per unit. The normal sales price is $22 per unit. Unit cost information for the normal level of activity is as follows:

Direct materials $5.20

Direct labour 4.10

Variable overhead 3.65

Fixed overhead 3.00

Total cost per unit $15.95

Required -

A) What are the relevant costs and benefits of this special order.

B) Will operating income increase or decrease if the order from this new customer is accepted - if so, by how much?

C) Would your answer change if the minimum amount of this new customer's order was 25,000 units and why?

Reference no: EM133093165

Questions Cloud

What should be the basic earnings per share for the year : What should be the basic earnings per share for the year ended December 31, 2021, rounded to the nearest penny
Calculate the amount of gross profit to be recognized : Calculate the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used
Calculate anticipated cash receipts from sales in january : Total expected sales in January: $160,000 of which 25% is cash sales and the balance on account. Calculate anticipated cash receipts from sales in January
What is the amount of depletion per ton : Vaughn Manufacturing acquires a coal mine at a cost of $1920000. Intangible development costs total $354000. What is the amount of depletion per ton
What are relevant costs and benefits of this special order : Costa's production capacity is 140,000 units per year but can only sell 120,000 units to regular customers. What are relevant costs and benefits
What amount should tolvin report as capitalized interest : Tolvin borrowed $20,000,000 payable in five annual installments of $4,000,000 plus interest at the rate of 7%. What amount Tolvin report as capitalized interest
Discuss important communication skills : Discuss these 5 important of communication skills in customer service department (pls dont copy from website)
Has france always been a powerful country : Has France always been a powerful country?
Prepare the journal entry to recognize interest revenue : On 1 July 20X2, King Ltd. purchased $500,000 bonds of Princess Inc. at par. Prepare the journal entry to recognize interest revenue

Reviews

Write a Review

Accounting Basics Questions & Answers

  Estimated revenues control account

The estimated revenues control account of star city general fund is eliminated when:

  What is the population of interest in this audit

You are performing a test of controls over sales during the audit of Car Parts Pty Ltd (Car Parts), What is the population of interest in this audit

  Identify the applicable accounting convention

Identify the applicable accounting convention for each of the following business scenarios. More than one convention may apply to each scenario.

  Why contribution income statements are better

Discuss/explain/illustrate why contribution income statements are better suited to pricing decisions than traditional income statements.

  Prepare in general journal form all financial statement

Prepare in general journal form all consolidated financial statement workpaper entries necessary at the end of the year

  How much will your company receive in cash

On March 1st, your company loans a customer $50,000 with an annual interest rate of 9%. How much will your company receive in cash when the loan matures

  Calculate discounted payback period for two projects

Calculate NPV, IRR, Payback and Discounted payback period for two projects. Assuming the projects are independent, which one would you recommend?

  What entry would overland trucking make to record the sale

(a) What entry would Overland Trucking make to record the sale of the truck for $17,000 cash? (b) What entry would Overland trucking make to record the sale of the truck for $10,000 cash?

  Determinable values be reported at fair market value

The single audit requirements apply only to state and local governments. Private not-for-profits do not have to comply with these requirements, even if they receive federal grants.

  Fixed selling and administrative

Fixed manufacturing overhead $106,800 Fixed selling and administrative $68,000 The total gross margin for the month under the absorption costing approach is:

  What was the total amount of sales tax collected

Topeca Supply paid the November sales tax to the state agency on December 10, 2018. What was the total amount of sales tax collected in 2018

  Convergence of ifrs and us gaap

Discuss the efforts made toward convergence of International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) on the financial performance reporting by business enterprises.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd