Question
A company produces teak dining tables for home builders. The cost of producing 5,000 teak dining tables is as follows. Direct Materials $ 600,000 Direct
A company produces teak dining tables for home builders. The cost of producing 5,000 teak dining tables is as follows.
Direct Materials | $ 600,000 |
Direct Labor | 300,000 |
Variable Manufacturing Overhead | 80,000 |
Fixed Manufacturing Overhead | 400,000 |
Total | $1,380,000 |
The company also incurs selling expenses of $10 per table. A home dcor company from Canada has offered the company $202 per table for a special order of 1,000 teak dining tables. The tables would be sold to Canada and thus would not conflict with the companys current sales. Selling expenses per table would be only $4 per table. The company has the available capacity to do the work.
Instructions:
A. Prepare an incremental analysis for the special order.
B. Should the company accept the special order? Why or why not?
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