Question
Savings, Inc. produces a single product, piggy banks. The costs of producing and selling a single product at the current activity level of 8,000 units
Savings, Inc. produces a single product, piggy banks. The costs of producing and selling a single product at the current activity level of 8,000 units per month are as follows:
Direct materials $2.50
Direct labor 3.00
Variable manufacturing overhead 0.50
Fixed manufacturing overhead 4.25
Variable selling expenses 1.50
Fixed selling and administrative expenses 2.00
The normal selling price is $15 per bank. The production capacity for Savings, Inc. is 10,000 banks per month. An order has been received from a potential overseas customer for 2,000 banks at a price of $12.00 per bank. This order would not affect regular sales. How much will monthly profits change if the order is accepted?
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