A company produces a product that sells for $37.95 each. The plant capacity is 750,000 units per year, but the normal volume is 500,000 units. Normal volume costs are given below.

	The unit cost
Direct Ingredients	$9.89
direct labor	$4.27
Variable Production Overhead	$11.06
Fixed costs	$4.37
Sales and Administrative Variable Expenses	$2.03

A customer offered to purchase 50,000 units at $34.32 each to be packaged in large cartons rather than in regular individual product containers. He will pick up the units with his own trucks. Thus, variable selling and administrative expenses per unit will be reduced by 57%. 

What is the extra operating income this company will get if it accepts this order?

Answer rating: 100% (QA)

First lets calculate the normal unit cost for producing 500000 units Normal unit cost Direct Ingredi... View the full answer