Audio Company produces sound systems for cars and sells them to auto manufacturers for $100 each.Full capacity
Question:
Audio Company produces sound systems for cars and sells them to auto manufacturers for $100 each.Full capacity is 20,000 systems per month but Audio Company is currently producing 18,000 systems per month for its regular customers.The company reports the following monthly results:
Per Unit
Total
Revenue
$100
$1,800,000
Direct Materials
25
450,000
Direct Manufacturing Labor
10
180,000
Variable Manufacturing Overhead
22
396,000
Fixed Manufacturing Overhead
3
54,000
Variable Selling expenses
19
342,000
Fixed Selling expenses
2
36,000
Total Costs
81
1,458,000
Operating income
$19
$342,000
Audio's manager receives a call regarding a one-time special order.Ted's Automotive needs 2,000 systems and will pay $65 per system.There will be no selling expenses incurred for this special order.Should Audio Company accept this one-time special order?Show your calculations.