6. Differential cost analysis for special order. The Detroit sales manager of Brolin Manufacturing, Inc., called the home office stating that a special order involving 3,600,000 gross of Product A could be obtained if it could be sold for 12 % off the list price. Management contacted the cost analyst, who sent the analysis shown on page 748 to the vice-president in charge of sales with a notation that the profit on this order would be $167,400 $405,000-$237,600). The vice-president in charge of sales asked for an explanation of this analy- sis. The cost analyst said that on the basis of the 19-forecast the company would be operating below its factory overhead absorption volume of 70% of capacity. The special order being above this predetermined volume would cause a swing from underabsorbed to overabsorbed fixed ex- penses. Requ.red: An analysis that could have saved the cost analyst much time and have been more helpful and meaningful to the sales executive. Special Order Cost Analysis S PECIAL ORDER ADDED TO 19- FORECAST 80% OF CAPACITY 19 FORECAST 60% OF CAPACITY Rate Rate Amount Amount gross) ....$140 $1,512,000 $1,512,000 Sales revenue (10,800,000 Special order (3,600,000 gross) Weighted average rate $.1400 $1,512,000 441,000 $1,953,000 1225 Tota! $140 $.1356 Standard costs: $0400 576,000 302,400 144,000 288,000 72,000 129,600 021 010 020 005 009 0210 0100 0200 0050 0090 226,800 108,000 216,000 54,000 97,200 Variable factory overhead.. Fixed factory overhead. Variable marketing expenses. Fixed administrative ex- 0070 100,800 $.1120 $1,612,800 $.0236 340,200 75,600 007 penses.. Volume variances: $36,000 fav 16,200 fav 12,600 fav $ (36,000) unfav (16,200) unfav. (12,600) unfav Factory overhead.... Marketing expenses.... $405,000 $ 237,600