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    Reid Company

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    I am a bit confused in determining the incremental profit for the production. Do I calculate for 25,000 Lops or do I calculate for 20,000 Lops and then add the cost of the 5,000 Lops for the special order. I have been searching your solution library and could not find an example so that i can follow it. Your solutions are a bit different from this one. I just need to compare my solution with yours as I have an upcoming exam and need to understand this aspect fully.

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    Solution Preview

    Reid Company manufactures and sells a single product called a Lop. Operating at capacity the company can produce and sell 30,000 Lops per year. Costs associated with this level of production and sales are given below:

    Per unit Total
    Direct materials $15 $450,000
    Direct labour 8 240,000
    Variable manufacturing overhead 3 90,000
    Fixed manufacturing overhead 9 270,000
    Variable selling expenses 4 120,000
    Fixed selling expense 6 180,000
    Total ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer whether should accept or reject special order.