Walton Company Manufactures a Product with the Following Costs Per

question 15

Multiple Choice

Walton Company manufactures a product with the following costs per unit at the expected production level of 84,000 units:
$\begin{array}{llr} \text {Direct materials } &\$12\\ \text { Direct labour } &36\\ \text { Variable manufacturing overhead} &18\\ \text { Fixed manufacturing overhead } &24\\\end{array}$
The company has the capacity to produce 90,000 units.The product regularly sells for $120.
-Refer to the figure.If a wholesaler offered to buy 4,500 units for $100 each,what would be the effect of the special order on income?

• A)$45,000 increase
• B)$90,000 decrease
• C)$153,000 increase
• D)$450,000 increase

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Definitions:

Machine-Hours

A measurement of production time using the number of hours machines are operated.

Manufacturing Overhead

All indirect costs related to the manufacturing process, such as utilities, rent for manufacturing facilities, and maintenance of equipment.

Job-Order Costing System

An accounting system that collects costs for each individual job or project separately to determine its profitability, commonly used in manufacturing or services where goods or services are produced on a bespoke basis.

Predetermined Overhead Rate

An estimated allocation rate that is used to apply the overhead costs to products or service units.