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Harmon Tool and Die (HTD) produces metal fittings, which it supplies to various manufacturing firms. HTD has prepared the following budgeted income statement for
Harmon Tool and Die (HTD) produces metal fittings, which it supplies to various manufacturing firms. HTD has prepared the following budgeted income statement for the next quarter when it expects to sell 50,000 units. HTD uses a Just-in-Time inventory system and has negligible inventory balances. Amount Per Unit Revenues $1,500,000 $30.00 CGS $1,100,000 $22.00 Gross Margin $400,000 $8.00 $250,000 $5.00 $150,000 $3.00 Op Expense Net Income Manufacturing fixed costs are $330,000. This includes charges for depreciation on plant and machinery plus other factory items. Administrative fixed costs (operating expenses) are estimated at $95,000. Krebs Inc., not current ly an HTD customer, has requested HTD supply 12400 fittings next quarter at a price of $22.50 per unit. The Krebs order will only incur variable manufacturing costs. Order processing and handling for the order will result in incremental administrative costs of $16,000. HTD has scheduled maintenance for two of the machines used in fittings production. As a result, they will be unable to complete the Krebs order without reducing normal sales and production by 10%. Determine the total profits if they accept the special order compared to the profits under normal budgeted production. Calculate your answer as the total profit with the special order less the total profit without the special order. Type your answer.
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