Question

Lattimer co.

Sales 15000 units at 12 180000

Variable Mfg. cost 97500

Fixed mfg. cost 21000

selling and adm exp. 36000 154500-

operating income 25,500

A foreign co whose sales will not affect lattimer market offers to by 5000 units at 7.50 per unit. I addition to existing costs, selling these units would add a .25 selling cost for export fees. Lattimer annual production capacity is 25,000 units. If lattimer accepts this additiona business, the sppecial order will yield a:

Answer 1

Incremental analysis

Incremental Revenue (5000*7.50)	37500
Incremental Expenses :
Variable Expense (5000*6.5)	32500
Selling expense (5000*0.25)	1250
Total incremental expenses	33750
Net profit/(loss)	$ 3750

Yes, the Lattimer should accept the additional business and it will yield $ 3750