Question
Waters Company produces and sells a single product. The cost of producing and selling a single unit of this product at the companys normal activity
Waters Company produces and sells a single product. The cost of producing and selling a single unit of this product at the companys normal activity level of 15,000 units per month is as follows:
Direct materials | $5.50 |
Direct labor | 12.75 |
Variable overhead | 2.00 |
Fixed overhead | 4.00 |
Variable selling and administrative expenses | 2.20 |
Fixed selling and administrative expenses | 3.00 |
Total cost per unit | $29.45 |
The normal selling price is $42 per unit. The companys capacity is 20,000 units per month. Waters recently received a special order from an overseas importer. The order is for 3,000 units at a price of $26 per unit. This order would not disrupt domestic sales or production. The order would not change the companys total fixed costs.
If the order is accepted, by how much will Waters monthly profits be increased or decreased?
Group of answer choices
$23,250 increase
$1,650 increase
$10,650 increase
$10,350 decrease
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