Scott Company Has an Annual Capacity of 18,000 Units

question 77

Essay

Scott Company has an annual capacity of 18,000 units.Budgeted operating results for 2006 are as follows:
A foreign wholesaler wants to buy 1,000 units at a price of $40 per unit.All fixed costs would remain within the relevant range.Variable selling costs on the special order would be the same as variable selling costs for regular orders.
Required:

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Definitions:

Cost Per Machine

The total cost associated with acquiring and operating a machine divided by the number of machines, relevant in cost analysis and budgeting for machinery investments.

Factory Labor

The total cost of labor directly associated with the operation of a manufacturing facility, including wages and benefits.

Work In Process Inventory

Goods that are in the process of being manufactured but are not yet completed in a company’s inventory.

Direct Labor

Costs associated with the work of employees directly involved in the production of goods or services.