Question - Mamoth LLC, produces a single product. The cost of producing and selling a single unit of this product as the company's normal activity level of 43,000 units per month is as follows:
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Direct Material
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$7.96
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Direct Labor
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$9.44
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Variable Manufacturing Overhead
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$1.45
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Fixed Manufacturing Overhead
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$10.64
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Variable selling and administrative expense
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$3.00
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Fixed selling and administrative expense
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$6.55
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The normal selling price of the product is $55.50 per unit. Direct labor is a variable cost.
An order has been received from an overseas customer for 2,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $0.24 less per unit on this order than on normal sales.
PART A: Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $31.42 per unit. This special order would (increase/decrease) the company's net operating income for the month by $______
PART B: Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting production of 600 units for regular customers. The minimum acceptable price per unit for the special order is, to the nearest cent, $_______
PART C: Suppose the company is already operating at capacity when the special order is received from the overseas customer. The opportunity cost of each unit delivered to the overseas customer would be $________