Question
Shanghai Exports, LTD produces wall mounts for flat panel television sets. The forecasted income statement for 2014 is as follows: statement for 2014 is as
Shanghai Exports, LTD produces wall mounts for flat panel television sets. The forecasted income statement for 2014 is as follows:
statement for 2014 is as follows:
Shanghai Exports, LTD Budgeted Income Statement For the Year 2014 | |
---|---|
Sales ($ 44 per unit) | $ 4,400,000 |
Cost of good sold ($ 32 per unit) | (3,200,000) |
Gross profit | 1,200,000 |
Selling expenses ($ 3 per unit) | (300,000) |
Net income | $ 900,000 |
Additional Information (1) Of the production costs and selling expenses, $800,000 and $100,000, respectively, are fixed. (2) Shanghai Exports, LTD received a special order from a hospital supply company offering to buy 12,500 wall mounts for $30. If it accepts the order, there will be no additional selling expenses, and there is currently sufficient excess capacity to fill the order. The company's sales manager argues for rejecting the order because "we are not in the business of paying $32 to make a product to sell for $30." Calculate the net benefit (cost) of accepting the special order.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started