Fillmore Steel Company of Texas manufacturers Part 748 (a component used in the Diesel engines).

Question
In addition, the company incurs $1.00 per unit on Freight and also pays 5% (on selling price) as sales commissions. The regular selling price of Part 748 is $34.00 per unit. The manufacturing overhead rate is $24.00 per hour which 1/3 is variable and 2/3 is FIXED. It requires 1/2 hour to manufacture one unit. The direct materials and direct labor are considered as VARIABLE costs. has approached the Fillmore Steel Company for the purchase of 30,000 units of Part 748 next month at $20.00 per unit, FOB shipping point. Fillmore Steel Company will NOT pay any sales commission on this special order. However, an additional FIXED cost of $13,000 for the month will have to be incurred for additional administrative and clerical work. This cost is exclusively related to the special order. The management of Fillmore Steel Company has approached you to solve this problem.

Question

In addition, the company incurs $1.00 per unit on Freight and also pays 5% (on selling price) as sales commissions. The regular selling price of Part 748 is $34.00 per unit. The manufacturing overhead rate is $24.00 per hour which 1/3 is variable and 2/3 is FIXED. It requires 1/2 hour to manufacture one unit. The direct materials and direct labor are considered as VARIABLE costs. has approached the Fillmore Steel Company for the purchase of 30,000 units of Part 748 next month at $20.00 per unit, FOB shipping point. Fillmore Steel Company will NOT pay any sales commission on this special order. However, an additional FIXED cost of $13,000 for the month will have to be incurred for additional administrative and clerical work. This cost is exclusively related to the special order. The management of Fillmore Steel Company has approached you to solve this problem.

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