Question
Catoproduces a hard disk drive that sells for $177per unit. The cost of producing25,000drives in the prior year was: Direct material $725,000 Direct labor 475,000Variable
Catoproduces a hard disk drive that sells for $177per unit. The cost of producing25,000drives in the prior year was:
Direct material
$725,000
Direct labor
475,000Variable overhead
225,000Fixed overhead
1,450,000Total cost
$2,875,000
At the start of the current year, the company received an order for2,990drives from a computer company in China. Management ofCatohas mixed feelings about the order. On one hand, they welcome the order because they currently have excess capacity. Also, this is the company's first international order. On the other hand, the company in China is willing to pay only $124per 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_______________select between increase and decrease
by $_______enter a dollar amount
.
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