Answer:
Financial advantage $40,560
Step-by-step explanation:
A special order request is financially worthy if the sales revenue from the special order is over and above the relevant cost of producing it.
The relevant variable cost will be determined as follows
Unit variable cost =5.20+ 3 +2.30+ 1.30= 11.8
Special machine= 16,000
$
Sales from special order (2,800× $32) = 89,600
Variable cost ( 2800 × $11.8)= (30,000 ) (33,040)
Investment in special machine (16,000)
Financial advantage 40,560
Note that the fixed manufacturing overheads were not included in the analysis, simply because they are not relevant. In other words, whether or not the special order is accepted these fixed costs would be concurred either way.
Financial advantage $40,560