Question - The following are Silver Corporation's unit costs of making and selling an item at a volume of 8,000 units per month (which represents the company's capacity):
Manufacturing: Direct materials$4 Direct labor$5 Variable overhead$2 Fixed overhead$8 Selling and administrative: Variable$1 Fixed$6
Present sales amount to 7,000 units per month. An order has been received from a customer in a foreign market for 1,000 units. The order would not affect regular sales. Total fixed costs, both manufacturing and selling and administrative, would not be affected by this order. The variable selling and administrative costs would have to be incurred for this special order as well as all other sales. Assume that direct labor is a variable cost.
What is the financial advantage (disadvantage) for the company from this special order if it prices the 1,000 units at $20 per unit?
$1,000
$9,000
($6,000)
$8,000