Question
Pink Bunny Corporation manufactures a product with the following full unit costs at a volume of 2,000 units: Direct materials $ 100 Direct labor 40
Pink Bunny Corporation manufactures a product with the following full unit costs at a volume of 2,000 units:
Direct materials | $ 100 |
Direct labor | 40 |
Manufacturing overhead (30% variable) | 75 |
Selling expenses (50% variable) | 25 |
Administrative expenses (10% variable) | 40 |
Total per unit | $280 |
A company recently approached Pink Bunnys management with an offer to purchase 225 units for $275 each. Pink Bunny currently sells the product to dealers for $400 each. Pink Bunnys capacity is sufficient to produce the extra 225 units. No selling expenses would be incurred on the special order. | ||
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If Pink Bunnys management accepts the offer, profits will:
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