JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement Per Unit $ 7.00 For Year Ended December 31 Sales (600,000 units) Variable costs Direct materials Direct labor Variable overhead Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income 1.64 0.56 0.60 4.20 0.20 0.15 $ 3.85 Annual Total $ 4,200,000 984,000 336,000 360,000 2,520,000 120,000 90,000 $ 2,310,000 A potential customer offers to buy 70,000 units for $3.60 each. These sales would not affect the company's sales through its normal channels. Details about the special offer follow. • Direct materials cost per unit and variable overhead cost per unit would not change. • Direct labor cost per unit would be $0.71 because the offer would require overtime pay. • Accepting the offer would require incremental fixed general and administrative costs of $7,000. • Accepting the offer would require no incremental fixed overhead costs.

JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement Per Unit $ 7.00 For Year Ended December 31 Sales (600,000 units) Variable costs Direct materials Direct labor Variable overhead Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income 1.64 0.56 0.60 4.20 0.20 0.15 $ 3.85 Annual Total $ 4,200,000 984,000 336,000 360,000 2,520,000 120,000 90,000 $ 2,310,000 A potential customer offers to buy 70,000 units for $3.60 each. These sales would not affect the company's sales through its normal channels. Details about the special offer follow. • Direct materials cost per unit and variable overhead cost per unit would not change. • Direct labor cost per unit would be $0.71 because the offer would require overtime pay. • Accepting the offer would require incremental fixed general and administrative costs of $7,000. • Accepting the offer would require no incremental fixed overhead costs.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.2E: Identify cost graphs The following cost graphs illustrate various types of cost behavior: For each...

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