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Wade Company produces a single product and has capacity to produce 240,000 units per month. Costs to produce its current monthly sales of 160,000 units
Wade Company produces a single product and has capacity to produce 240,000 units per month. Costs to produce its current monthly sales of 160,000 units follow: Direct materials Direct labor Variable overhead Fixed overhead Fixed general and administrative Per Unit $ 25.00 58.00 20.00 35.00 26.00 Costs at 160,000 units $ 4,000,000 9,280,000 3,200,000 5,600,000 4,160,000 $ 26,240,000 Totals $ 164.00 The normal selling price of the product is $200 per unit. A new customer offers to purchase 40,000 units for $150 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales. The income from the special offer would be: Multiple Choice $3,880,000. $1,440,000 O $1,880,000. $(560,000) o $2,250,000
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