| Feist Co. expects to sell 400,000 units of its product in the next period with the following results. |
| Sales (400,000 units) | $ | 6,000,000 | ||
| Costs and expenses | ||||
| Direct materials | 800,000 | |||
| Direct labor | 1,600,000 | |||
| Overhead | 400,000 | |||
| Selling expenses | 600,000 | |||
| Administrative expenses | 1,028,000 | |||
| | | |||
| Total costs and expenses | 4,428,000 | |||
| | | |||
| Net income | $ | 1,572,000 | ||
| | | |||
| | ||||
| The company has an opportunity to sell 40,000 additional units at $13 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs: (1) total overhead would increase by 16% and (2) administrative expenses would increase by $172,000. |
| Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $13 per unit. (Leave no cells blank be certain to enter “0” wherever required. Input all amounts as positive values. Omit the “$” sign in your response.) |
| Normal Volume | Additional Volume* | Combined Total | |
| (Click to select)OverheadDirect materialsCashSalesDirect labor | $ | $ | $ |
| Costs and expenses | |||
| (Click to select)CashSalesDepreciation expenseRent expenseDirect materials | |||
| (Click to select)Rent expenseDirect laborCashDepreciation expenseSales | |||
| (Click to select)Rent expenseDepreciation expenseSalesCashOverhead | |||
| (Click to select)Selling expenseDepreciation expenseCashRent expenseSales | |||
| (Click to select)Administrative expensesCashDepreciation expenseRent expenseSales | |||
| | | | |
| Total costs and expenses | $ | $ | $ |
| | | | |
| (Click to select)Net incomeNet loss | $ | $ | $ |
| | | | |
| | |||
| Should the company accept or reject the offer? | ||||
|
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