McKinney Cycle Accessories had the following operating results last year related to the production and sale of
Question:
McKinney Cycle Accessories had the following operating results last year related to the production and sale of
16,000 motorcycle helmets:
Sales
.......................................................................................
$1,920,000
Variable manufacturing costs
......................................................
880,000
Fixed manufacturing costs
..........................................................
272,000
Variable selling and administrative costs
....................................
128,000
Fixed selling and administrative costs
........................................
224,000
McKinney expects the same operating results this year.
The Penny Pincher Motorcycle
Club has offered to buy 1,500 helmets this year, but only if it can buy them for $60 each.
McKinney
has sufficient idle capacity to fill this order.
This special order would not change McKinney's cost
structure or affect regular sales.
Variable selling and administrative costs will be incurred at the normal rate per
unit on this order.
If McKinney accepts the order, how much will its profits increase or
decrease this year?