Glade Company produces a single product. The costs of producing and selling a single unit of this product at the company’s current activity level of 8,500 units per month are:
Direct Material: $1.80 ; Direct Labor: $2.00 ; variable manufacturing overhead: $.60 ; Fixed Manufacturing overhead: $4.35 ; Variable selling and manufacturing expenses:$1 ; Fixed selling and manufacturing expenses: $1.
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The normal selling price is $23 per unit. The company’s capacity is 10,300 units per month. An order has been received from a potential customer overseas for 1,800 units at a price of $20.00 per unit. This order would not affect regular sales. |
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If the order is accepted, by how much will monthly profits increase or decrease? (The order would not change the company’s total fixed costs.)
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