Question
ACHS Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of
ACHS Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 48,000 units per month is as follows:
Per UnitDirect materials$46.60Direct labor$8.90Variable manufacturing overhead$1.90Fixed manufacturing overhead$18.90Variable selling & administrative expense$3.40Fixed selling & administrative expense$16.00
The normal selling price of the product is $102.10 per unit.An order has been received from an overseas customer for 2,800 units to be delivered this month at a special discounted price of $84.40 per unit.The variable selling and administrative expense would be$2.00 less per uniton this order than on normal sales. This order would not change the total amount of the company's fixed costs and direct labor is a variable cost in this company.
Suppose there is ample idle capacity to produce the units required by the overseas customer, the monthlyfinancial advantage (disadvantage)for the company as a result ofacceptingthis special order should be:
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