Question
Tullius Corporation has received a request for a special order of 8,000 units of product C64 for $50.00 each. The normal selling price of the
Tullius Corporation has received a request for a special order of 8,000 units of product C64 for $50.00 each. The normal selling price of the product is $53.25 each. The normal unit product cost of product C64 is computed as follows:
Direct materials $18.10
Direct labor 7.40
Variable manufacturing overhead 5.20
Fixed manufacturing overhead 4.80
Unit product cost 35.50
Direct labor is a variable cost. The special order would have no effect on the company"s total fixed manufacturing overhead costs. The customer would like some modifications which would increase the variable costs by $5.00 per unit which requires a one-time investment of $43,000 in special molds that would have no salvage value.
Required:
How much is the "effect" ( incremental net operating income) on the company's total net operating income through accepting the special order? Please show your work.
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