Question
The following are Goldmark Industries costs per unit of making and selling an item at a volume of 8,000 units per month, which represents the
The following are Goldmark Industries costs per unit of making and selling an item at a volume of 8,000 units per month, which represents the company's capacity:
Manufacturing:
Direct materials $4
Direct labor $5
Variable overhead $2
Fixed overhead $8
Selling and administrative:
Variable $1
Fixed $6
Current sales amount to 7,000 units per month. A special order has been received from a foreign customer for 1,000 units, which would not affect regular sales. Total fixed costs, both manufacturing and selling/administrative, would not be affected by this order. The variable selling and administrative costs would have to be incurred for this special order as well as all other sales. Assuming that direct labor is a variable cost, what is the financial advantage (disadvantage) for the company from this special order if it is priced at $20 per unit?
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