Question
ABC Co received a special order of 8,400 units of product for $45.30 each. Normally, this product sells for $50.40 each. This special order
ABC Co received a special order of 8,400 units of product for $45.30 each. Normally, this product sells for $50.40 each. This special order required slight customization. The normal product cost composes the following elements: Please note the following acronyms. DM: Direct materials DL: Direct labor VMOH: Variable manufacturing overhead FMOH: Fixed manufacturing overhead DM DL VMOH FMOH Unit product cost $16.10 5.40 2.60 5.50 $29.60 ABC has ample capacity to fulfill the special order, and the special order has no effect on the company's total fixed manufacturing overhead costs and other sales. The customization made to product would increase the variable costs by $5.00 per unit, requiring a one-time Investment of $44,800 which has no other use. Required: What's the Impact on ABC's total net operating Income If It accepts the special order?
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