Question

The regular selling price is $22 per unit. Costs are $16 per unit, which consists of $8 direct labor per unit, $3 direct materials per unit, $2 variable overhead per unit, and $3 fixed overhead per unit. Sales are low because of a recession. A large retail chain offered to buy 1,000 units from you at a discounted price of $16. Assume that you have enough spare capacity to fulfill this special order. If you accept the special order in the short term, profit will: Group of answer choices decrease by $6,000 decrease by $3,000 increase by $6,000 increase by $3,000 remain the same

Answer 1

decrease by $6,000

Step-by-step explanation:

The computation of the profit in the case when the special order is accepted is shown below:

given that

Regular selling price = 22

Discounted selling price= 16

number of units to be sold =1000

Now

discount = 1000 ×($22 - $16)

= $6,000

Hence, profit decreases by $6000

Therefore the option first is correct

The same would be considered