A firm makes 150,000 electric thermostats selling at £12 each. Their last operating statement was:

A contract has been offered to sell an additional 50,000 thermostats at £10 each.
Acceptance of this contract would increase fixed costs by £50,000 and would mean paying an overtime premium of 20% for the extra labour required. However, because of bulk purchasing a discount of 3% could be obtained for all material purchases.
Prepare a Differential Cost Statement for the above.

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Sales (150,000 12) 1,800,000 less Labour 650,000 Materials 525,000 1,175,000 = Contribution 625,000 less Fixed Costs 450,000 = Profit 175,000