Company A manufactures two products A and B that sells for 120 € and 80 € respectively. Each product uses only one type of raw materials that costs € 6 per kilogram. The company has the capacity to...


Company A manufactures two products A and B that sells for 120 € and 80 € respectively. Each product uses only one type of raw materials that costs € 6 per kilogram. The company has the capacity to annually produce 100,000 units of each product. The company considers its traceable fixed mahufacturing overhead to be avoidable and its common fixed expenses are unavoidable and have been allocated to products based on sales in euros. The Company's average cost per unit for each product at the annual level of activity is provided in the table.

















































Items
Product costs in euro


A


B

Direct materials3012
Direct labor2015
Variable manufacturing overhead75
Traceable fixed manufacturing overhead1618
Variable selling expenses128
Common fixed expenses1510
Total costs per unit10068



(Answer each question independently unless instructed otherwise)



Assume that the Company expects to produce and sell 90000 units of product B during the current year. A new customer is willing to buy 5,000 additional units of product B for a price of 39 € per unit. Evaluate what is the financial advantage (disadvantage) of accepting the new customer's order.


(Advantage express as postive number, disadvatage as negative (with minus sign))



Jun 10, 2022
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