Al-Wahid manufacturers kitchen cabinets in
Pakistan. The cost of producing 5000 cabinets.
Material 50,000,000. Labor 25,000,000. Variable OH
10,000,000. Fixed OH 40,000,000. Total 125,000,000.
Al-Wahid also incurs selling expense of 2000 per
cabinet. Western company offered Al-Wahid of
Rs16500 per cabinet for special order of 1000 cabinets.
This will not interrupt current sales of Al-Wahid. Selling
expense will be Rs-500 per cabinet. Al-Wahid has also
the capacity for production.
(a) What impact will be on net income if Al-Wahid
accepts the offer ?
(b) Should Al-Wahid accept this special offer?

Answer rating: 100% (QA)

a To calculate the impact on net income we need to compare the total cost of producing and ... View the full answer