Question
Pardo Company produces a single product and has capacity to produce 145,000 units per month. Costs to produce its current monthly sales of 116,000
Pardo Company produces a single product and has capacity to produce 145,000 units per month. Costs to produce its current monthly sales of 116,000 units follow. The normal selling price of the product is $112 per unit. A new customer offers to purchase 29,000 units for $64.80 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales. Direct materials Direct labor Variable overhead Fixed overhead Fixed general and administrative Totals Per Unit Costs at 116,000 Units $ 12.50 $ 1,450,000 15.00 1,740,000 14.00 17.50 1,624,000 2,030,000 13.00 1,508,000 $ 72.00 $ 8,352,000 (a) Compute the income from the special offer. (b) Should the company accept the special offer?
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