Problem: A Company produced and sold 8,000 units of product and is operating at 80% of plant capacity.
Unit information about its product is as follows:
| Sales Price |
|
|
|
|
|
$35 |
| Variable manufacturing cost |
|
|
$16 |
|
| Fixed manufacturing cost (48,000 / 8,000) |
|
6 |
22 |
| Profit per unit |
|
|
|
|
|
$13.00 |
The company received a proposal from a foreign company to buy 1,000 units of the company's product for $20 per unit, This is a one-time only order and acceptance of this proposal will not affect the company's regular sales. The President the company is reluctant to accept the proposal because he is concerned that the company will lose money on the special order. All fixed costs are allocated to individual products.
Instructions:
Prepare a schedule reflecting an incremental analysis of this proposal. Indicate the effect the acceptance of this order might have on the company's income.