Question
MUD Company makes a product called XER that it normally sells for $23 per unit. The company has received a one-time special order that would
MUD Company makes a product called XER that it normally sells for $23 per unit. The company has received a one-time special order that would allow them to sell 2000 units of XER for $17 per unit. The special order would have no effect on regular sales. The normal cost of making product XER for the company is given below based on 10,000 units. The company has the extra capacity to make the special order.
Per Unit | Total (based on 10,000 units) | |
Direct Materials | 6 | 60,000 |
Direct Labor | 5 | 50,000 |
Variable Overhead | 2 | 20,000 |
Fixed Cost | 3 | 30,000 |
1 - How much will sales increase if the special order is accepted? $
2 - How much will variable costs increase if the special order is accepted? $
3 - How much will fixed costs increase if the special order is accepted? $
4 - By how much will the operating income of the company change if the special order is accepted? $
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