Pilgrim Corporation Makes a Range of Products

question 22

Essay

Pilgrim Corporation makes a range of products.The company's predetermined overhead rate is $23 per direct labor-hour, which was calculated using the following budgeted data: Management is considering a special order for 800 units of product N89E at $69 each.The normal selling price of product N89E is $88 and the unit product cost is determined as follows: 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:
If the special order were accepted, what would be the impact on the company's overall profit?

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Definitions:

Fixed Fee

A pre-determined and agreed-upon total charge for a specific service or project, not subject to change based on the amount of time or resources used.

Critical To Project

Elements or factors that are essential for the successful completion of a project, without which the project cannot proceed or succeed.

Quality And Schedule Needs

The requirements concerning the standard of work to be delivered and the timeline for its completion in a project.

RFQ

Stands for Request for Quotation, a document that invites suppliers to submit a quote for the supply of specific goods or services.