What impact would accepting this special order have on operating profit? b. Should RTD accept the order?
Rowe Tool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the
| Amount | Per Unit | |
|---|---|---|
| Sales revenue | $ 1,928,200 | $ 31.10 |
| Costs of fitting produced | 1,450,800 | 23.40 |
| Gross profit | $ 477,400 | $ 7.70 |
| Administrative costs | 337,900 | 5.45 |
| Operating profit | $ 139,500 | $ 2.25 |
Fixed costs included in this income statement are $403,000 for depreciation on plant and machinery and miscellaneous factory operations and $103,000 for administrative costs. RTD has received a request for 10,000 fittings to be produced in the next quarter from Endicott Manufacturing. Endicott has never purchased from RTD, although they have been a local company for many years. Endicott has offered to pay $21.70 per unit. RTD can easily produce the 10,000 units with its existing capacity. Production of the 10,000 units will incur all variable
Required:
a. What impact would accepting this special order have on operating profit?
b. Should RTD accept the order?
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