Problem on excess operating capacity


At the Wilber Company it costs $30 per unit ($20 variable and $10 fixed) to make a product at full capacity that normally sells for $45. A foreign wholesaler offers to buy 3,000 units at $24 each. Wilber will incur special shipping costs of $2 per unit. Assuming that Wilber has excess operating capacity, indicate the net income (loss) Wilber would realize by accepting the special order.

(1) Explain how the analysis is to be performed and

(2) Show all computations required to arrive at the correct answer.

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Accounting Basics: Problem on excess operating capacity
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