Kasten inc. budgeted 10000 widgets for production during, Ask an Expert

Accounting

Kasten, Inc. budgeted 10,000 widgets for production during 2010. Kasten has capacity to produce 12,000 units. Fixed factory overhead is allocated to production. The following estimated costs were provided:

Direct material ($7/unit) $ 70,000
Direct labor ($15/hr. × 2 hrs./unit) 300,000
Variable manuf overhead ($3/unit) 30,000
Fixed factory overhead costs ($5/unit) 50,000

Total $450,000
Cost per unit = $45

Kasten received an order for 1,000 units from a new customer in a country in which Kasten has never done business. This customer has offered $43 per widget.

Should Kasten accept the order? How much would profit change if it accepts the offer?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9402988

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