=+Puma Ltd, an instruments company, has a problem with its preferred supplier of XT-107. This supplier has
Question:
=+Puma Ltd, an instruments company, has a problem with its preferred supplier of XT-107. This supplier has had a three-week labour strike. Puma approaches Wainwright Electronics sales representative, Judy Monks, about providing 3000 units of XT-107 at a price of $75 per unit. Judy informs the XT-107 product manager, Sam O’Brien, that she would accept a flat commission of $8000 rather than the usual 15% of revenues if this special order were accepted. Wainwright has the capacity to produce 300000 units of XT-107 each month, but demand has not exceeded 200000 units in any month in the past year.
Required 1 If the 3000-unit order from Puma is accepted, how much will operating income increase or decrease? (Assume the same cost structure as in June 2014.)
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9781442563377
2nd Edition
Authors: Monte Wynder, Madhav V. Rajan, Srikant M. Datar, Charles T. Horngren, William Maguire, Rebecca Tan