Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 48

Special Order; ABC Costing (Continuation of Problem 11-33) Assume the same information as for Problem 11-33, except that the $12 fixed manufacturing overhead consists of $3 per unit batch-related costs (that is, costs that increase in total with the number of batches produced) and $9 per unit facilities-level fixed costs. Also, assume that each new batch causes increased costs of $1,000 per batch; the remainder of the batch-level costs consists of tools and supervision labor that do not vary with the number of batches. The remainder of fixed costs do not vary with the number of units produced or the number of batches.
Required
1. What is the total fixed manufacturing overhead cost for the period Break down this total into its component parts. (Hint: You will have to find non-incremental batch-related costs.)
2. Calculate the relevant unit and total cost of the special order, including the new information about batch-related costs.
3. If accepted, how would the special order affect GGI's operating income (Show calculations.)