Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this
Question:
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 60,000 units per month is as follows:
The normal selling price of the product is $126.10 per unit.
An order has been received from an overseas customer for 4,000 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $3.20 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.
Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $96.40 per unit. The monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be:
112,000
(98000)
26,800
(102,000)