Question
Fulton Company has a maximum capacity level of 65,000 units per month. Each unit regularly sells for $7. Unit costs at this level are: Direct
Fulton Company has a maximum capacity level of 65,000 units per month. Each unit regularly sells for $7. Unit costs at this level are:
Direct materials $0.55
Direct labor $0.80
Variable overhead $0.20
Fixed overhead $0.25
Marketing - fixed $0.35
Marketing variable $0.45
Current monthly sales are 65,000 units. Cherokee Company has contacted Fulton Company about purchasing 7,000 units at $4.50 each. The special order would require $1 per unit for shipping. Fulton is now selling 65,000 units through regular channels each period, which require $0.40 per unit for shipping. Marketing costs would not be incurred on the special order. What is Fulton Companys change in operating profits if the special order is accepted?
A) $18,550 Decrease
B) $13,650 Increase
C) $17,850 Increase
D) $4,750 Decrease
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