Question
A customer has requested that lewelling corporation fill a special order for 2700 unites of product x47 for $33 a unit. Product x47s normal unit
A customer has requested that lewelling corporation fill a special order for 2700 unites of product x47 for $33 a unit. Product x47s normal unit product cost is $18.40 broken down as follows:
Direct materials 5.10
Direct labor 4.00
Variable manufacturing overhead 2.20
Fixed manufacturing overhead 7.10
Unit product cost 18.40
Assume that direct labor is a variable cost. The special order would have no effect on the companys total fixed manufacturing overhead costs. The customer would like modifications made to product x47 that would increase the variable costs by $1.40 per unit and that would require an investment of $17000 in special molds that would have no salvage value. This special order would have no effect on the companys other sales. The company has ample spare capacity for producing the special order. What would be the financial advantage or disadvantage for the company as a result of accepting this special order?
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