Handcrafted Wooden
Posted in Arts and Crafts on 10/10/2009 12:30 pm by adminHandcrafted Wooden
Please help!asap 10pts WILL be given!!! Thanks!?
Robert Wayne, a local craftsman, normally sells his handcrafted wooden birdhouses for $88 each. Robert has the capacity to produce as many as 50 birdhouses a week.
In a normal week, Robert makes 20 birdhouses with the following costs per unit:
Direct Materials $ 5.00 per unit
Direct Labor $ 20.00 per unit
Variable Overhead $ 4.00 per unit
Fixed Overhead $ 2.00 per unit*
*when 20 birdhouses are made per week.
Robert has received a special order from a local plant nursery to purchase 25 birdhouses for a price of $90 each. The nursery wishes to have the birdhouses engraved with their own logo; therefore, the order would require Robert to rent a special engraving tool at a cost of $200.
If Robert accepts this special order, net income will increase by:$______
Thanks for any help!!!
Incremental Revenue (25 x $90) $2250
Less: inremental cost
DM ($5 x 25) $125
DR ($20 x 25) 500
VOH ($4 x 25) 100
Engraving tool $200
Total incremental cost $925
Total Increase in net income $1325
Total increase in net income therefore is $1325.
Fixed cost is ignored because it is irrelevant cost. It won’t change within the given capacity. Hence, it will not affect the decision.
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