Mcniff Corporation Makes a Range of Products Management Is Considering a Special Order for 200 Units of Overhead

question 134

Essay

Mcniff Corporation makes a range of products. The company's predetermined overhead rate is $28 per direct labor-hour, which was calculated using the following budgeted data:
$$\begin{array} { l r } \text { Variable manufacturing overhead } & \$ 180,000 \\\text { Fixed manufacturing overhead } & \$ 380,000 \\\text { Direct labor-hours } & 20,000\end{array}$$ Management is considering a special order for 200 units of product O96S at $122 each. The normal selling price of product O96S is $149 and the unit product cost is determined as follows:
$\begin{array}{lr}\text { Direct materials } & \$ 67.00 \\\text { Direct labor } & 32.00 \\\text { Manufacturing overhead applied } & 44.80 \\\text { Unit product cost } & \$ 143.80\end{array}$ If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.
Required:
The financial advantage (disadvantage) for the company as a result of accepting this special order would be:

---

Definitions:

Domestic Market

The supply and demand for goods and services within a country's borders.

Video Games

Electronic games involving interaction with a user interface to generate visual feedback on a device, ranging from consoles to computers.

Pencil Sharpeners

Devices that shave away the wooden surface of a pencil to expose more of the lead, enabling finer writing or drawing.

Export

The selling and shipping of goods or services from one country to another.