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Calculate expected total profit or loss from special order

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Reference no: EM132523358

Question 1: Use the information given below to calculate the expected total profit or loss from the special order.

INFORMATION

A company produces a single product called "Choc". The normal selling price is R45 and the unit manufacturing costs are as follows:

Direct materials 18

Direct labour 9

Overheads 9

  • 50% of the manufacturing overheads are variable
  • A sales commission of 5% applies to sales at the normal selling price only
  • Administrative costs are fixed and amount to R38 250 per month
  • The monthly production capacity is 33 000 units.
  • The sales level for the past few months has been at a steady level of 27 000 units per month.
  • A special order for 5 500 units of Choc at a price of R40 each has been received. The products have to be delivered to this customer at a cost of R7.50 per unit.

Reference no: EM132523358

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