Special Order Problem -
Z-Tech produces a single product. The cost of producing and selling a single unit of this product at the company's current activity level of 8,000 units per month is as follows:
Cost Per Unit
Direct materials . . . . . . . . . . . . . . $2.50
Direct labor. . . . . . . . . . . . . . . . . . $3.00
Variable manufacturing overhead $0.50
Fixed manufacturing overhead. . $4.25
Variable selling & administrative $1.50
Fixed selling & administrative. . . $2.00
The normal selling price is $15 per unit. The company's capacity is 10,000 units per month. An order has been received from an overseas source for 2,000 units at t price of $12 per unit. This would would not affect regular sales.
Required: If the order is accepted, by how much will monthly profits be increased or decreased? Show your computations.