Carlsbad Enterprises has the capacity to manufacture 400,000 computer cases per year. The company currently produces and sells 320,000 cases per year at a retail price of $399 per case. The cost of producing and selling a crate is as follows:

Variable production costs	$	163
Fixed production costs		42
Variable selling and management costs		80
Fixed selling and management costs		21
Total amount	$	306

The company has received a special order for 30,000 cases at a price of $250 per case.
Variable selling and
administrative costs will be only $52 per case, as you don't have to pay a sales commission on a private order. The special order will have no effect on the total fixed costs. The company rejected the offer based on the following calculations:

Selling price per case	$	250
Variable production costs		163
Fixed production costs		42
Variable selling and management costs		52
Fixed selling and management costs		21
Net loss per case	$	(28	)

 Required

Calculate the difference profit/loss if the order is accepted.

In terms of operating profit for the current year, do you agree with the decision to reject the special order?

Answer rating: 100% (QA)

To determine the difference in profitloss if the special order is accepted we need to calculate the ... View the full answer