Question
Kneller Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 12,000 medals each month;
Kneller Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 12,000 medals each month; current monthly production is 9,600 medals. The company normally charges $100 per medal. Cost data for the current level of production are shown below: Variable costs: Direct materials $ 480,000 Direct labor $ 153,600 Selling and administrative $ 24,960 Fixed costs: Manufacturing $ 144,000 Selling and administrative $ 78,720 The company has just received a special one-time order for 500 medals at $85 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Assume that direct labor is a variable cost.
Required: Determine the amount of financial advantage or disadvantage if the company accepts this special order.
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