A company which manufactures and sells one single product is currently operating at 85% of full capacity, producing 102,000 units per month. The current total monthly costs of production amount to $330,000, of which $75,000 are fixed and are expected to remain unchanged for all levels of activity up to full capacity. A new potential customer has expressed interest in taking regular monthly delivery of 12,000units at a price of $2.80 per unit. All existing production is sold each month at a price of $3.25 per unit. If the new business is accepted, existing sales are expected to fall by 2 units for every every 15 units sold to the new customer. What is the overall increase in monthly profit which would result from accepting the new business?

Answer rating: 100% (QA)

To calculate the overall increase in monthly profit from accepting the new business we need to compa... View the full answer