Question Completion:
Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $1,500,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows:
Variable costs per unit:
Direct materials $120
Direct labor 30
Factory overhead 50
Selling and administrative expenses 35
Total variable cost per unit $235
Fixed costs:
Factory overhead $250,000
Selling and administrative expenses 150,000
Selling price is determined as $360 per unit under the product cost method.
Answer:
Crystal Displays Inc.
Differential Analysis of Special Order:
Normal Special Order Differential
Production Alternative 2 Analysis
Sales revenue $1,800,000 $288,000 $288,000
Variable costs 1,175,000 188,000 188,000
Contribution margin $625,000 $100,000 $100,000
Fixed costs:
Factory overhead $250,000 $0 $0
Selling and admin.
expenses 150,000 0 0
Total fixed costs $400,000 $0 $0
Net income $225,000 $100,000 $100,000
Explanation:
a) Data and Calculations:
Investment in assets = $1,500,000
Normal Production and sales units = 5,000
Cost of production and sales:
Variable costs per unit:
Direct materials $120
Direct labor 30
Factory overhead 50
Selling and
administrative expenses 35
Total variable cost per unit $235
Fixed costs:
Factory overhead $250,000
Selling and administrative expenses 150,000
Total fixed costs $400,000
Special order from Maple Leaf Visual Inc.
Quantity ordered = 800 units
Offer price per unit = $225
Selling price per unit = $360
