Question
Barry Industries has an annual plant capacity of 71000 units; current production is 56000 units per year. At the current production volume, the variable cost
Barry Industries has an annual plant capacity of 71000 units; current production is 56000 units per year. At the current production volume, the variable cost per unit is $27 and the fixed cost per unit is $4.40. The normal selling price of 's product is $50.00 per unit. Barry has been asked by Dexter Company to fill a special order for 11,000 units of the product at a special sales price of $23.00 per unit. Dexter is located in a foreign country where Barry does not currently operate. Dexter will market the units in its country under its own brand name, so the special order is not expected to have any effect on Barry's regular sales.
- Requirements 1. How would accepting the special order impact Barry's operating income? Should Barry accept the special order? 2. How would your analysis change if the special order sales price were to be $43.00 per unit and Barry would have to pay an attorney a fee of $19,000 to make sure it is complying with export laws and regulations relating to the special order? Requirement 1. How would accepting the special order impact Barry's operating income? Should Barry accept the special order? Complete the following incremental analysis to determine the impact on Barry's operating income if it accepts this special order. (Enter a "0" for a and/or operating income from the special order.) Total Order (11,000 units) Incremental Analysis of Special Sales Order Decision Revenue from special order Less expenses associated with the order: Variable manufacturing cost Contribution margin MINE Less: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special orderStep by Step Solution
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