Question
Tullis Corporation has received a request for a special order of 8,000 units of product for $50.00 each. Normal selling price of this product is
Tullis Corporation has received a request for a special order of 8,000 units of product for $50.00 each. Normal selling price of this product is $53.25 each, but the units would need to be modified for the customer. The normal unit product cost of the product is:
Direct materials $18.10
Direct labor 7.40
Variable manufacturing overhead 5.20
Fixed manufacturing overhead 4.80
Unit production cost $35.50
Direct labor is variable cost. The special order has no effect on total fixed manufacturing overhead costs. The modifications to the product would increase variable costs by $5.00 per unit and require a one-time investment of $43,000 in special molds with no salvage value. The special order wouldn't effect other sales.
How much is the effect (incremental net operating income) on the company's total net operating income through accepting the special order?
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