14. Montoya Enterprises produces a sword that sells for $200. Although the company's production capacity is...
14. Montoya Enterprises produces a sword that sells for $200. Although the company's production capacity is 3,400 swords per year, only 2,500 swords are currently being produced and sold. Humperdinck Corporation has offered to purchase 500 swords as a one-time special purchase at a price of $160 per sword. If the special order is accepted, Montoya Enterprises will have to incur additional fixed costs of $1,500 due to additional set-ups.
At Montoya’s current level of production (2,500 swords), the Montoya Enterprises incurs the following costs:
Direct materials $220,000
Direct labor $100,000
Variable factory overhead $ 60,000
Fixed factory overhead $ 70,000
What will be the impact on Montoya’s Enterprises’ income if the special order is accepted?
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14. Montoya Enterprises produces a sword that sells for $200.
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