Assume a company is considering whether to accept or reject a special order opportunity to sell a customer 300 units of a slightly customized version of one of its products for $37.25. The normal selling price of this product is $48 per unit. It can fulfill the order using existing manufacturing capacity. The company’s accounting system estimates the following unit product cost for this product: Per Unit Direct materials $ 18 Direct labor 12 Manufacturing overhead 10 Total cost $ 40 The company estimates that $3 of its manufacturing overhead varies with respect to the number of units produced. The remainder of its overhead is fixed and unaffected by the volume of units produced within the relevant range. Assuming that this decision will have no effect on sales to other customers, what is the financial advantage (disadvantage) of accepting the special order?
Assume a company is considering whether to accept or reject a special order opportunity to sell a customer 300 units of a slightly customized version of one of its products for $37.25. The normal selling price of this product is $48 per unit. It can fulfill the order using existing manufacturing capacity. The company’s accounting system estimates the following unit product cost for this product:
| Per Unit | |
|---|---|
| Direct materials | $ 18 |
| Direct labor | 12 |
| Manufacturing |
10 |
| Total cost | $ 40 |
The company estimates that $3 of its manufacturing overhead varies with respect to the number of units produced. The remainder of its overhead is fixed and unaffected by the volume of units produced within the relevant range. Assuming that this decision will have no effect on sales to other customers, what is the financial advantage (disadvantage) of accepting the special order?
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