Question
Ayayai Company is a leading manufacturer of sunglasses. One of Ayayais products protects the eyes from ultraviolet rays. An upscale sporting goods store has contacted
Ayayai Company is a leading manufacturer of sunglasses. One of Ayayais products protects the eyes from ultraviolet rays. An upscale sporting goods store has contacted Ayayai about purchasing 28,000 pairs of these sunglasses. Ayayais unit manufacturing cost, based on a full capacity of 235,000 units, is as follows:
Direct materials | $6 | |
Direct labor | 4 | |
Manufacturing overhead (75% fixed) | 18 | |
Total manufacturing costs | $28 |
Ayayai also incurs selling and administrative expenses of $73,500 plus $2 per pair for sales commissions. The company has plenty of excess manufacturing capacity to use in manufacturing the sunglasses. Ayayais normal price for these sunglasses is $40 per pair. The sporting goods store has offered to pay $30 per pair. Since the special order was initiated by the sporting goods store, no sales commission will be paid. What would be the effect on Ayayais income if the special order were accepted?
Ayayais income will (select an option) increase, decrease, by : $ enter a dollar amount |
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