Question
LL company budgeted 100,000 units for production during 2019. The following cost per unit information is available: direct material = $5, direct labour = $10,
LL company budgeted 100,000 units for production during 2019. The following cost per unit information is available: direct material = $5, direct labour = $10, variable manufacturing overhead = $4. Fixed manufacturing overhead for the year = $300,000. LL sells at $50 per unit, market price.
It received a special order for 10,000 units from a new customer in a country in which LL has never done business. This customer has offered special order price at $25 per unit. If LL accepts the order, it needs to incur $3 selling expenses per unit for this order; in addition, it must rent a machine specifically for this order, it costs $13,000. LL has enough capacity to accept the order, without affecting its normal production plan.
If LL accepts this order, then the incremental contribution the order is making = $.............
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