The following data relate to Webster Manufacturing: Anticipated sales............................... 50,000 units Normal sales price/unit..................... ...
The following data relate to Webster Manufacturing:
Anticipated sales............................... 50,000 units
Normal sales price/unit..................... $20
Variable manufacturing cost/unit..... $6
Variable selling cost/unit.................... $2
Fixed manufacturing cost................. $150,000 ($3.00/unit)
Fixed selling cost ............................ $200,000 ($4.00/unit)
Total cost/unit (full absorption)........ $15.00
Webster has the opportunity to take a one-time special order from a customer who wants to buy 10,000 units, but is only willing to pay $14.00 per unit. The special order will not affect Webster’s anticipated sales to other customers or the company’s fixed costs.
Should Webster accept the special order? Why or why not? Show your calculations.
Homework Answers
| As the special order will not affect the existing | |
| market, the decision will be based on incremental | |
| revenues and costs associated with the special order. | |
| Incremental revenue = 10000*14 = | $ 1,40,000 |
| Incremental costs = 10000*(6+2) = | $ 80,000 |
| Incremental operating profit | $ 60,000 |
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The following data relate to Webster Manufacturing:
Anticipated sales...............................
50,000 units
Normal sales price/unit..................... ...
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