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:

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Definitions:

Tattoo

Permanent marks or designs made on the body by inserting pigment through pricks into the skin's dermis layer.

Microwave Oven

A kitchen appliance that heats and cooks food by exposing it to electromagnetic radiation in the microwave frequency range.

Frozen Food

Food that has been subjected to freezing and is stored at extremely low temperatures to preserve its freshness, taste, nutritional value, and shelf life.

Opportunity Cost

The financial impact of rejecting the subsequent preferable alternative while deciding.