Pardo Company produces a single product and has the capacity to produce 190,000 units per month. Costs to produce its current monthly sales of 152,000 units follow. The normal selling price of the product is $114 per unit. A new customer offers to purchase 38,000 units for $63.00 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales.

	Per Unit	Costs at 152,000 Units
Direct materials	$ 12.50	$ 1,900,000
Direct labor	15.00	2,280,000
Variable overhead	11.00	1,672,000
Fixed overhead	17.50	2,660,000
Fixed general and administrative	14.00	2,128,000
Totals	$ 70.00	$ 10,640,000

(a) Compute the income from the special offer.
(b) Should the company accept the special offer?

Answer rating: 100% (QA)

a To compute the income from the special offer we need to compare the revenue from selling 38000 uni... View the full answer