Question
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the companys normal activity level of
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the companys normal activity level of 105,600 units per year is:
Direct materials $ 2.40
Direct labor $ 4.00
Variable manufacturing overhead $ 0.80
Fixed manufacturing overhead $ 3.35
Variable selling and administrative expenses $ 1.20
Fixed selling and administrative expenses $ 3.00
The normal selling price is $22.00 per unit. The companys capacity is 135,600 units per year. An order has been received from a mail-order house for 2,500 units at a special price of $19.00 per unit. This order would not affect regular sales or the companys total fixed costs.
Required: What is the financial advantage (disadvantage) of accepting the special order?
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