# 406 acc midterm 2 q3

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406 acc midterm 2 q3
Question No. 3 (a)

6

Marks

Solution
The following financial data apply to the DVD production plant of ABC
Company for the month of July:

Direct materials
Direct labor
Total manufacturing costs

Budgeted Costs per DVD
\$
1.500
\$
0.800
\$
0.700
\$
1.000
\$
4.000

Variable manufacturing overhead varies with respect to units produced.
Fixed manufacturing overhead as per above financial date is based on the followings:
Budgeted production

150,000.00
\$ 150,000.00

Other financial data:
Sale price per unit
Variable marketing costs
Fixed marketing costs

\$
\$

5.000
5.00% of dollar sales
65,000.00 per month

A special order was received during the month from a customer not in its normal marketing channels. Details of the special order are as follows:
Sale price
Quantity of the special order
a)

\$

3.800
1,000.00

Required:
Compute the change of monthly operating income of accepting the special order?
Step 1
Compute the monthly income without special order.
Sale
Direct materials
Direct labor
Variable marketing costs
Fixed marketing costs
Monthly operating income

\$
\$
\$
\$
\$
\$
\$
\$

750,000.00
225,000.00
120,000.00
105,000.00
150,000.00
37,500.00
65,000.00
47,500.00

(Sale price per unit * Budgeted production)
(Direct materials cost per unit * Budgeted production)
(Direct labor cost per unit * Budgeted production)
(Variable manufacturing overhead per unit * Budgeted production)
(Total sale price * Variable marketing cost %)
Fixed marketing costs per month

Sale revenue of regular order
Sale revenue of special order
Direct materials
Direct labor
Variable marketing costs
Fixed marketing costs
Monthly operating

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