Question
Whispering WindsCompany is a leading manufacturer of sunglasses. One ofWhispering Winds's products protects the eyes from ultraviolet rays. An upscale sporting goods store has contactedWhispering
Whispering WindsCompany is a leading manufacturer of sunglasses. One ofWhispering Winds's products protects the eyes from ultraviolet rays. An upscale sporting goods store has contactedWhispering Windsabout purchasing29,900pairs of these sunglasses.Whispering Winds's unit manufacturing cost, based on a full capacity of254,000units, is as follows:
Direct materials $7
Direct labor 5
Manufacturing overhead (75% fixed) 19
Total manufacturing costs $31
Whispering Windsalso incurs selling and administrative expenses of $75,400plus $3per pair for sales commissions. The company has plenty of excess manufacturing capacity to use in manufacturing the sunglasses.Whispering Winds's normal price for these sunglasses is $42per pair. The sporting goods store has offered to pay $36per pair. Since the special order was initiated by the sporting goods store, no sales commission will be paid. What would be the effect onWhispering Winds's income if the special order were accepted?
- Whispering Winds's income will decrease/ increaseby $ ______
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