The following are Wyeth Co$.$s unit costs of making and selling an item at a volume of $10,000$ units per month:

Manufacturing:

Direct materials................$$1\mathrm{.}00$

Direct Labor......................$$2\mathrm{.}00$

Variable overhead...............$$\mathrm{.}50$

Fixed overhead....................$$\mathrm{.}90$

Selling & administrative:

Variable..............................$$1\mathrm{.}50$

Fixed.....................................$$\mathrm{.}60$

Present sales amount to $9,000$ units per month. An order has been received from a customer in a foreign market for $1,000$ units. The order would not affect current sales. Fixed costs, both manufacturing and selling and administrative, are constant within the relevant range between $8,000$ and $10,000$ units. The variable selling and administrative costs would have to be incurred for this special order as well as all other sales. Assume direct labor is a variable cost and that the normal selling price per unit is $$10\mathrm{.}00.$

$3.$ How much will the company$$s net operating income, increase or $($decrease$)$ if it prices the $1,000$ units in the special order at $$6$ each?

Answer rating: 100% (QA)

To calculate the change in the companys net operating income if it prices the 1000 units in the spec... View the full answer