Question
Cato produces a hard disk drive that sells for $177 per unit. The cost of producing 25,000 drives in the prior year was: Direct material
Cato produces a hard disk drive that sells for $177 per unit. The cost of producing 25,000 drives in the prior year was: Direct material $ 725,000 Direct labor 475,000 Variable overhead 225,000 Fixed overhead 1,450,000 Total cost $ 2,875,000 At the start of the current year, the company received an order for 2,990 drives from a computer company in China. Management of Cato has mixed feelings about the order. On one hand, they welcome the order because they currently have excess capacity. Also, this is the companys first international order. On the other hand, the company in China is willing to pay only $124 per unit. What will be the effect on profit of accepting the order? (Enter decrease in profit using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Profit will ( increase/ decrease) by $______.
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