Burns Industries currently manufactures and sells 19,000 power saws per month, although it has the capacity to produce 34,000 units per month. At the 19,000-unit-per-month level of production, the per-unit cost is $63, consisting of $39 in variable costs and $24 in fixed costs. Burns sells its saws to retail stores for $79 each. Allen Distributors has offered to purchase 4,900 saws per month at a reduced price. Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs.
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Assume that Allen Distributors offers to purchase the additional 4,900 saws at a price of $46 per unit. If Burns accepts this price, Burns' monthly gross profit on sales of power saws will:
Increase by $34,300. Increase by $225,400. Decrease by $161,700. Decrease by $83,300. 15. Required information
Using an incremental analysis approach, Burns should consider accepting this special order only if the price per unit offered by Allen is at least:
$24. $63. $79. $39. 16.
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Burns decides to accept the special order for 4,900 units from Allen at a unit sales price that will add $98,000 per month to its operating income. The unit price Burns charging Allen is:
$39. $59. $63. $79.