Question
The Parton Company has gathered the following information for a unit of it's most popular product: Direct Materials: $20 Direct Labor: $15 Overhead (60% variable):
The Parton Company has gathered the following information for a unit of it's most popular product:
Direct Materials: $20
Direct Labor: $15
Overhead (60% variable): $20
Cost to Manufacture: $55
The above cost information is based on 10,000 units. Parton currently sells 8,500 units for $62 per unit. A distributor has offered to buy 1,000 units at a price of $50 per uni. This special order would not disturb regular sales.
Required:
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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