A customer has asked Clougherty
Corporation to supply 4,000 units of product M97, with some modifications, for
$40.10 each. The normal selling price of this product is $48.00 each. The
normal unit product cost of product M97 is computed as follows.
Direct Materials $18.50
Direct Labor $1.20
Variable manufacturing overhead $8.40
Fixed manufacturing overhead $3.90
Unit product cost $32.00
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 M97 that would increase the variable costs by $5.70 per unit and
that would require a one-time investment of $31,000 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
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