Asked by Fitri Hj Ahmad on Jul 11, 2024
Verified
A customer has asked Lalka Corporation to supply 3,000 units of product H60, with some modifications, for $34.70 each. The normal selling price of this product is $46.35 each. The normal unit product cost of product H60 is computed as follows:
Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product H60 that would increase the variable costs by $3.80 per unit and that would require a one-time investment of $24,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.Required:Determine the financial advantage or disadvantage of accepting the special order.
Special Order
A one-time customer order often requiring customization or a deviation from standard production practices.
Modifications
Modifications refer to changes or alterations made to a product or system, often to improve functionality, efficiency, or to tailor it to specific needs or preferences.
- Examine the effects of unique orders on profit margins and the ability to meet production demands.
- Comprehend the decision-making process regarding in-house production versus outsourcing, and its effects on expenditure and operational activities.
Verified Answer
AM
Learning Objectives
- Examine the effects of unique orders on profit margins and the ability to meet production demands.
- Comprehend the decision-making process regarding in-house production versus outsourcing, and its effects on expenditure and operational activities.