Question
ABC Company produces a single unit that it sells for $15 per unit. ABC has the capacity to produce 25,000 units each month. ABC is
ABC Company produces a single unit that it sells for $15 per unit. ABC has
the capacity to produce 25,000 units each month. ABC is currently selling
18,000 units each month. The costs associated with each unit appears below:
direct materials$2.30
direct labor1.80
variable overhead1.20
sales commissions0.70
packaging1.00
distribution1.10
total variable cost$8.10
allocated fixed overhead1.30
allocated fixed selling costs0.90
ABC Company has received a special order from a customer who wants to
purchase 10,000 units at a reduced price of $11 per unit. The special
order customer has agreed to provide their own label and pay shipping
costs. Thus, there would be no sales commissions or distribution costs
associated with the special order.
Calculate the increase in company profits if ABC Company accepts the
special order.
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