Minnesota Manufacturing has an opportunity to export 2,000 units of its product to a foreign country. The current selling price is $166, but the special order will be sold at a unit price of $120. This special order will not affect its current sales, all of which are domestic. Freight and shipping costs of $10 per unit would be incurred on the foreign order. Current variable manufacturing costs are $46 per unit manufactured, and variable selling and administrative costs are $33 per unit sold. Included in variable selling expenses is a sales commission of $4 per unit, which would not apply to the foreign order. Fixed manufacturing costs are $166,000 per year and fixed selling and administrative expenses are $151,000 per year.
The company now manufactures and sells 6,000 units per year. What is the effect on profits if the special order is taken? Show all calculations.