Torque Master Tools produced and sold 50,000 Nematic Socket Torque Wrenches and is operating at...
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Accounting
Torque Master Tools produced and sold 50,000 Nematic Socket Torque Wrenches and is operating at 70% of plant capacity. Unit information about its product is as follows:
Sales price $70
Variable manufacturing cost $45
Fixed manufacturing cost ($500,000 50,000) 10 55
Profit per unit $15
The company received a proposal from a foreign company to buy 10,000 Nematic Socket Torque Wrenches for $50 each. This is a one-time only order and acceptance of this proposal will not affect the companys regular sales. The president of Torque Master Tools, Inc. Andy Granatelli, is reluctant to accept the proposal because he is concerned that the company will lose money on the special order.
Required:
Prepare a schedule reflecting an incremental analysis of this proposal and indicate the effect the acceptance of this order might have on the companys income.
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