West star company manufactures and sells computer monitors, Ask an Expert

Accounting

West Star Company manufactures and sells computer monitors at $200 each. The following is the cost information for the manufacture and sale of one monitor, given the normal manufacture and sales level of 5000 is:

Direct materials $48 per unit
Direct labor 64 per unit
Variable overhead 36 per unit
Variable selling and admin. expenses 12 per unit
Fixed manufacturing overhead $125,000, in total

West Star actually has the capacity to produce 7000 monitors, but demand has not been high enough to do so. West Star received a special order for 1500 monitors at a sales price of $175 per unit. West Star will pay a reduced sales commission on the special order, reducing variable selling and administrative expenses from $12 per unit to $8 per unit. What is the net effect of the special order on the company's profit? Show your work.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9974931

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