OWE Manufacturing Co. produces a single product, "G". Budgeted amounts for the coming year are as follows: Sales (120,000 units @ $10 each) $1,200,000 Direct material $360,000 ($3 per unit) Direct Labor $240,000 ($2 per unit) Variable overhead $120,000 ($1 per unit) Fixed overhead $240,000 (MANAGEMENT MIGHT INCORRECTLY THINK OF THIS AS $2 PER UNIT BUT THAT IS NOT HOW FIXED EXPENSES WORK) Total Expenses per unit are therefore 3+2 +1 + 2 (fixed) = $8 Watch Industries has offered to purchase 1,000 units of "G" at a price of $7.25 per unit. These will have additional variable costs of $0.25 per unit over the old variable costs. . Dran has the capacity to produce this order and will not affect any of their other operations.
a) What is the incremental revenue associated with accepting this special order?
b) What is the incremental cost associated with the special order?
c) What is the incremental profit or loss expected to be generated?(net of Revenue -Expenses)
d) Should they accept the special order? Why or why not?