Sycamore Shops has a capacity of 50,000 units and is currently producing and selling 45,000 at...

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Sycamore Shops has a capacity of 50,000 units and is currently producing and selling 45,000 at $50 a unit. The present cost s

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Answer 1

Answer #1

Fixed overhead will not increase within the relevant range

2000 of current sales will have to be sacrificed for the special order

Hence, profit from the order = Sales Revenue from order - Variable cost - Contribution Margin lost on current sales

= 7000*45 - (20+10+6)*7000 - (50-20-10-6)*2000

= $35,000

Hence, the answer is

B. profits will increase by $35000

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Answer 2

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