Special order

Wyoming Wire produces $12\mathrm{.}5-$gauge barbed wire that is retailed through farm supply companies. Presently, the company has the capacity to produce $100,000$ tons of wire per year. It is operating at $80$ percent of annual capacity, and at this level of operations, the cost per ton of wire is as follows:

Direct material $$560$

Direct labor $40$

Variable overhead $50$

Fixed overhead $190$

Total $$840$

The average sales price for the output produced by the firm is $$900$ per ton. The State of Texas has approached the firm to supply $200$ tons of wire for the state$$s prisons for $$670$ per ton. No production modifications would be necessary to fulfill the order from the State of Texas.

a$.$ What total cost per ton is relevant to the decision to accept this special order? $

Answer

b$.$ What would be the dollar effect on pre$-$tax income if this order were accepted?