Answered

Discover a wealth of knowledge at Westonci.ca, where experts provide answers to your most pressing questions. Discover comprehensive solutions to your questions from a wide network of experts on our user-friendly platform. Connect with a community of professionals ready to provide precise solutions to your questions quickly and accurately.

Premium Co. produces park benches. A customer has offered Premium Co. $700 per unit for 100 units. The normal selling price is $850 per bench. To fill the order, Chris would incur unit-level costs of $500 per unit and batch-level costs of $15,000. Premium Co. also incurred $20,000 of product-level costs to design the bench and $200,000 of facility-level costs. Based on the differential revenues and costs, Premium Co. should ______ the special order.

Sagot :

ayokenny2001

Answer:

See below

Explanation:

Customer's cost = $700 × 100 units = $70,000

Normal selling price = $850 × 100 units = $85,000

Premium Co's cost = ($500 × 100 units) + $15,000 + ($20,000 × 100 units) + $200,000

= $50,000 + $15,000 + $2,000,000 + $200,000

= $2,265,000

The differential cost(customer offering) is therefore

= $2,265,000 - $70,000

= $2,195,000

The differential cost(selling) is

= $2,265,000 - $85,000

= $2,180,000

Premium Co. should by the order.

Yes, premium co. should accept the order because it will increase profit by $5,000".

Revenue based problem:

Computation:

Additional revenue = [$700][100]

Additional revenue = $70,000

Cost of special order = [(500)(100) + (15000)]

Cost of special order = 50000 + 15000

Cost of special order = 65,000

Additional profit = 70,000 - 65,000

Additional profit = $5,000

Find out more about 'Additional profit':

https://brainly.com/question/3883496?referrer=searchResults

Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. We appreciate your time. Please revisit us for more reliable answers to any questions you may have. Keep exploring Westonci.ca for more insightful answers to your questions. We're here to help.