The Cardinal Company produces T-shirts promoting Otterbein University to various retailers. The cost of producing and selling a single T-shirt at the company's current activity level of 10,000 units per month are:
- Direct materials $ 3.00
- Direct labor 2.00
- Variable manufacturing overhead 1.00
- Fixed manufacturing overhead 4.00
- Variable selling and admin. Expenses 1.50
- Fixed selling and admin. Expenses 1.00
The normal selling price is $16 per unit. The company's capacity is 12,000 units per month. Due to Otterbein University participating in the Division III National Championship game, an order has been received from a retailer for 2,000 additional T-shirts at $14 per unit. This order would not affect regular sales but would increase the company's total fixed costs by $10,000
Ignore the impact of income taxes in your calculation.Should the order be accepted? What would be the impact on monthly profits?