Question
Harold Manufacturing has a plant capacity of 1,000,000 widgets. Currently, 970,000 widgets are produced and sold. The following is the current annual income statement: Sales
Harold Manufacturing has a plant capacity of 1,000,000 widgets. Currently, 970,000 widgets are produced and sold. The following is the current annual income statement:
Sales (at $12 per unit) $11,640,000
Variable Cost (at $8 per unit) 7,760,000
Contribution Margin $ 3,880,000
Fixed Costs 2,522,000
Net income $1,358,000
Harold has been approached about a special order for 40,000 units at a sales price of $9 per unit.
If Harold accepts this offer,
a. What are the total sales from the special offer
b. how much are total variable cost for the new offer units?
c. what are the fixed costs for the new offer units?
d. what is net income resulting from the new offer?
Name two issues that Harold should be worried about with this special order?
e. __________________
f. __________________
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