Question

ative expense $ 20.00 The normal selling price of the product is $110.10 per unit. An order has been received from an overseas customer for 3,200 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $2.40 less per unit on this order than on normal sales. Direct labor is a variable cost in this company. Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $88.40 per unit. The monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be:

Answer 1

$84,480

Step-by-step explanation:

Calculation to determine what the monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be:

First step is to calculate the Contribution margin

Selling price = $88.40

Less: Variable costs:

Direct material = $ 48.60

Direct labor = $ 9.30

Variable manufacturing overhead = $ 2.30

Variable selling & admin costs ($ 4.20 - $2.40) $1.80

Contribution margin = $26.4

Now let calculate the monthly financial advantage of accepting the special order

Monthly financial advantage of accepting the special order =($26.4 * 3200 units)

Monthly financial advantage of accepting the special order = $84,480

Therefore the monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be:$84,480