A company has been offered a special order to sell $100$ units of a product at a price of $$400$ per unit. The normal selling price per unit is $$520.$ The company has spare operating capacity and can produce the special order using direct materials that cost $$60$ per unit, direct labor costs of $$190$ per unit, and manufacturing overhead costs of $$200$ per unit. Of the manufacturing overhead cost, $$75$ is fixed.

What would be the effect on net income from accepting th

e special order?

$$ $$2,500$ increase in net income

$$ $$12,000$ decrease in net income

$$ $$15,000$ increase in net income

$$ $$5,000$ decrease in net income

A company has been offered a special order to sell $100$ units of a product at $$620$ per unit. The normal selling price per unit is $$600.$ The company has spare operating capacity and can typically produce standard units using direct materials that cost $$200$ per unit and direct labor costs of $$360$ per unit. However, to complete the special order, the firm will need to hire an outside engineer to modify its existing design for the custom order. This will cost $$7,000.$

What will be the effect on net income from accepting the special order?

$$ $$10,000$ decrease

$$ $$1,000$ decrease

$$ $$10,000$ increase

$$ $$1,000$ increase