Question

Check my work Check My Work button is now enabledItem 10Item 10 1.42 points Helix Company has been approached by a new customer to provide 2,000 units of its regular product at a special price of $6 per unit. The regular selling price of the product is $8 per unit. Helix is operating at 75% of its capacity of 10,000 units. Identify whether the following costs are relevant to Helix's decision as to whether to accept the order at the special selling price. No additional fixed manufacturing overhead will be incurred because of this order. The only additional selling expense on this order will be a $0.50 per unit shipping cost. There will be no additional administrative expenses because of this order. Calculate the operating income from the order.

Answer 1

Question Completion:

b. Direct materials cost of $1 per unit

c. Direct labor of $2 per unit

d. Variable manufacturing overhead of $1.50 per unit

e. Fixed manufacturing overhead of $0.75 per unit

f. Regular selling expenses of $1.25 per unit

g. Additional selling expenses of $0.50 per unit

h. Administrative expenses of $0.60 per unit

Answer:

Helix Company

1. Relevant Costs for special orders:

a. is not relevant

b. is relevant

c. is not relevant.

2. Operating income from the special order:

= $2,000

Step-by-step explanation:

Special order = 2,000 units

Normal selling price = $8

Special selling price = $6

Operating capacity = 75%

Relevant selling expense = $0.50 per unit

Units being produced = 7,500 (10,000 * 75%)

Revenue from the special order:

Sales revenue = $12,000 ($6 * 2,000)

Cost of goods = $9,000 ($4.50 * 2,000)

Total expenses $1,000 ($0.50 * 2,000)

Operating income = $2,000

b. Direct materials cost of $1

c. Direct labor of $2

d. Variable manufacturing overhead of $1.50

Total variable manufacturing costs = $4.50

e. Fixed manufacturing overhead of $0.75 per unit

f. Regular selling expenses of $1.25 per unit

g. Additional selling expenses of $0.50 per unit

h. Administrative expenses of $0.60 per unit