Question
Black Oak Company makes and sells oak boxes for a price of $60 each. Unit costs based on anticipated monthly sales of 1,000 boxes are
Black Oak Company makes and sells oak boxes for a price of $60 each. Unit costs based on anticipated monthly sales of 1,000 boxes are as follows:
Direct material cost$15
Direct labor cost 12
Variable manufacturing overhead3
Variable selling overhead5
Fixed costs 2
A chain store has offered to buy 100 boxes per month at $58 each. To accept this special order, Black Oak will have to restrict its sales to regular customers to only 900 boxes per monthly because its production capacity cannot be expanded in the short run. However, no variable selling expenses will be incurred for this special order. If Black Oak accepts the chain store's offer, its profit will
increase or decrease by how much
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