A Customer Has Asked Goes Corporation to Supply 6,000 Units

question 3

Essay

A customer has asked Goes Corporation to supply 6,000 units of product Y19,with some modifications,for $31.30 each.The normal selling price of this product is $46.50 each.The normal unit product cost of product Y19 is computed as follows:

Direct labor is a variable cost.The special order would have no effect on the company's total fixed manufacturing overhead costs.The customer would like some modifications made to product Y19 that would increase the variable costs by $8.90 per unit and that would require a one-time investment of $20,000 in special molds that would have no salvage value.This special order would have no effect on the company's other sales.The company has ample spare capacity for producing the special order.
Required:
Determine the effect on the company's total net operating income of accepting the special order.Show your work!

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Definitions:

Cost of Goods Sold

The total direct costs attributable to the production of goods sold by a company.

T-Accounts

A graphical representation used in accounting to show the debit and credit transactions affecting each aspect of a company's finances or accounts.

Raw Materials

Basic materials that are used in the production process to manufacture products, before any processing or manufacturing has occurred.

Finished Goods

Items that are finished being made but have not been purchased by consumers yet.