Question
The Parton Company has gathered the following information for a unit of its more popular product: Direct materials: $40 Direct labor: $30 Overhead (60% variable):
The Parton Company has gathered the following information for a unit of its more popular product:
Direct materials: $40 Direct labor: $30 Overhead (60% variable): $40 Cost to manufacture: $110
The above cost information is based on 20,000 units. Parton currently sells 17,000 units for $124 per unit. A distributor has offered to buy 2,000 units for $ 100 per unit. This speical order would not disturb regular sales.
a. Calculate Parton's change in operating profits if the special order is accepted.
b. How many units of regular sales could be lost before this contract is not profitable?
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