Correct answer-----------Decrease by $12,475
Working
|
financial advantage (disadvantage) of accepting the special
order |
|
Additional Revenue from offer (2825 x $15.20) |
$ 42,940.00 |
|
Less: Total Additional cost due to acceptance of offer |
$ 55,415.00 |
|
Financial Disadvantage |
$ (12,475.00) |
.
|
Calculation of Additional Cost of Order of 2825 units |
|
|
Per Unit |
Total |
|
Direct material and labor |
$
5.00 |
$
14,125.00 |
|
Variable manufacturing overheads |
$
0.20 |
$
565.00 |
|
Loss of contribution on regular sales ((19-5-.20)*2825) |
$
13.80 |
$
38,985.00 |
|
Additional fixed cost |
|
$
1,740.00 |
|
Total Additional cost
due to acceptance of order |
$
19.00 |
$
55,415.00 |
If order is accepted then regular sales of 2825 will be lost
because the company is operating at maximum capacity and there is
no free capacity.
