Q: Anderson Manufacturing makes a single product. Budget information regarding the current period is given below:
|
Revenue (100,000 units at $8.00)
|
$800,000
|
|
Direct materials
|
150,000
|
|
Direct labor
|
125,000
|
|
Variable manufacturing overhead
|
235,000
|
|
Fixed manufacturing overhead
|
110,000
|
|
Net income
|
$180,000
|
Dye Company approaches Anderson with a special order for 15,000 units at a price of $7.50 per unit. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company's orders. However, Anderson is operating at capacity and will incur an additional $50,000 in fixed manufacturing overhead if the order is accepted.
1. What is the incremental income (loss) associated with accepting the special order?
a) ($14,000)
b) $36,000
c) ($23,500)
d) $27,000
2. What is the incremental revenue associated with accepting the special order?
a) $170,000
b) $112,500
c) $70,000
d) $120,000