Homework Answers
Change in profit = $15,000 Increase
The offer should be accepted
.
Working
The cost of accepting offer is less than revenue from it so its better to accept
| financial advantage (disadvantage) of accepting the special order | |
| Additional Revenue from offer (5000 x $30) | $ 150,000.00 |
| Less: Total Additional cost due to acceptance of offer | $ 135,000.00 |
| Financial Advantage | $ 15,000.00 |
.
| Calculation of Additional Cost of Order | ||
| Per Unit | Total | |
| Direct material | $ 15.00 | $ 75,000.00 |
| Direct labor | $ 8.00 | $ 40,000.00 |
| Variable manufacturing overheads | $ 3.00 | $ 15,000.00 |
| Additional variable cost | $ 1.00 | $ 5,000.00 |
| Total Additional cost due to acceptance of order | $ 27.00 | $ 135,000.00 |
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