Question
A company is contemplating the acceptance of a special order (the special order will not displace the production of any normal units). The following costs
A company is contemplating the acceptance of a special order (the special order will not displace the production of any normal units). The following costs are associated with the normal units(1) Direct materials, $4 per unit; (2) Direct labor, $10 per unit; (3) Variable manufacturing overhead, $8 per unit and (4) Fixed manufacturing overhead, $6 per unit, unavoidable. A foreign company wants to purchase 1,000 units at a special unit price of $20. The normal sales price per unit is $40. In addition, a special stamping machine will have to be purchased for $2,000 in order to stamp the foreign companys name on the product.
What is the amount of incremental revenue?
What is the amount of incremental expenses?
What is the amount of incremental net operating income?
Should the special order be accepted or rejected?
Please show work.
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