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Gamma Ltd has a plant capacity of 20,000 units per month. Unit costs at a capacity are: Direct materials $3.50 Direct labour $4.50 Variable overhead
Gamma Ltd has a plant capacity of 20,000 units per month. Unit costs at a capacity are:
Direct materials $3.50
Direct labour $4.50
Variable overhead $2.5
Fixed overhead $1.5
Administration-fixed $0.5
Current monthly sales are 15,000 units at $12 each. Delta Ltd has contacted Gamma Ltd about purchasing 5000 units at $11 each. Determine the effect on profit for Delta Ltd if the special order is accepted.
A. Decrease by $ 10 000
B. Increase by $2 500
C. Decrease by $7 500
D. Decrease by $ 2 500
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