Stryker Industries received an offer from an exporter for 26,000 units of product at $16 per...
Stryker Industries received an offer from an exporter for 26,000 units of product at $16 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data is available:
| Domestic unit sales price | $22 |
| Unit manufacturing costs: | |
| Variable | 13 |
| Fixed | 5 |
What is the differential cost from the acceptance of the offer?
a.$416,000
b.$338,000
c.$572,000
d.$130,000
Homework Answers
Since the normal production will not be affected, there is spare capacity and hence fixed costs will not be incurred for the special order
Hence, differential cost is equal to the variable cost
= 26,000*13
=$338,000
I.e. b
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