cost Accounting- Eley Corporation produces a single product. The cost of producing

1. Eley Corporation produces a single
product. The cost of producing and selling a single unit of this product at
the company’s normal activity level of 47,000 units per month is as follows:

Direct materials

$46.10

Direct labor

$8.80

Variable manufacturing
overhead

$1.80

Fixed manufacturing
overhead

$18.70

Variable selling &
administrative expense

$3.20

Fixed selling &
administrative expense

$15

The normal selling price of
the product is $100.10 per unit.

An
order has been received from an overseas customer for 2,700 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 $1.90 less per unit on this order than on normal sales.

Direct labor is a variable cost in
this company.

Suppose
the company is already operating at capacity when the special order is
received from the overseas customer. What would be the opportunity cost of
each unit delivered to the overseas customer?

2. Eley Corporation produces a single
product. The cost of producing and selling a single unit of this product at
the company’s normal activity level of 45,000 units per month is as follows:

Direct materials

$45.10

Direct labor

$8.60

Variable manufacturing
overhead

$1.60

Fixed manufacturing
overhead

$18.30

Variable selling &
administrative expense

$2.80

Fixed selling &
administrative expense

$13

The normal selling price of
the product is $96.10 per unit.

An
order has been received from an overseas customer for 2,500 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 $1.70 less per unit on this order than on normal sales.

Direct labor is a variable cost in
this company.

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 back
on production of 950 units for regular customers. The minimum acceptable
price per unit for the special order is closest to:

3.
The
following are the Jensen Corporation’s unit costs of making and selling an
item at a volume of 2,100 units per month (which represents the company’s
capacity):

Manufacturing:

Direct
materials

$2.10

Direct
labor

$3.10

Variable
overhead

$1.60

Fixed
overhead

$0.40

Selling and
Administrative:

Variable

$3.10

Fixed

$0.80

Present sales amount to
1,250 units per month. An order has been received from a customer
in a foreign market for 210 units. The order would not affect current sales.
Fixed costs, both manufacturing and selling and administrative, are constant
within the relevant range between 1,250 units and 2,100 units. The variable
selling and administrative expenses would have to be incurred on this special
order as well as for all other sales. Direct labor is a variable cost.

Assume the company has 55 units
left over from last year which have small defects and which will have to be
sold at a reduced price for scrap. The sale of these defective units will
have no effect on the company’s other sales. Which of the following costs is
relevant in this decision?