AJ & Company manufactures tennis rackets. Their newest product sells for $350. The company produces and sells
Question:
AJ & Company manufactures tennis rackets. Their newest product sells for $350. The company produces and sells about 15,000 units per year. Cost data follows:
Variable manufacturing | $190 | per unit |
Variable selling and administrative | $80 | per unit |
Fixed manufacturing | $250,000 | per year |
Fixed selling and administrative | $52,000 | per year |
A potential deal has come up for a one-time sale of 100 units at a special price of $290 per unit.
The sale will not negatively impact the company's regular sales activities.
It will require the normal variable manufacturing costs and variable selling and administrative costs.
There is plenty of excess capacity and the deal will not impact fixed costs.
Create a DIFFERENTIAL ANALYSIS of a Special Pricing Decision showing the expected increase or decrease in operating income if this order is accepted.
Based on your analysis, would you accept or reject the order? Why?
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer