Wehrs Corporation has received a request for a special order of 9,500 units of product K19 for $46.40 each. The normal selling price of this product is $51.50 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product K19 is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $17.20 6.50 3.70 6.60 $34.00 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product K19 that would increase the variable costs by $6.10 per unit and that would require a one-time investment of $45,900 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required: Determine the effect on the company's total net operating income of accepting the special order.

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter5: Process Costing
Section: Chapter Questions
Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...
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Wehrs Corporation has received a request for a special order of 9,500 units of product K19 for $46.40 each. The
normal selling price of this product is $51.50 each, but the units would need to be modified slightly for the
customer. The normal unit product cost of product K19 is computed as follows:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Unit product cost
$17.20
6.50
3.70
6.60
$34.00
Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing
overhead costs. The customer would like some modifications made to product K19 that would increase the
variable costs by $6.10 per unit and that would require a one-time investment of $45,900 in special molds that
would have no salvage value. This special order would have no effect on the company's other sales. The
company has ample spare capacity for producing the special order.
Required:
Determine the effect on the company's total net operating income of accepting the special order.
Transcribed Image Text:Wehrs Corporation has received a request for a special order of 9,500 units of product K19 for $46.40 each. The normal selling price of this product is $51.50 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product K19 is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $17.20 6.50 3.70 6.60 $34.00 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product K19 that would increase the variable costs by $6.10 per unit and that would require a one-time investment of $45,900 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required: Determine the effect on the company's total net operating income of accepting the special order.
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