Question: Poseidon Co. makes boats. Below is their Operating Income Statement for the 1,500 boats they normally sell in a year: Neptune Inc. has asked Poseidon

Poseidon Co. makes boats. Below is their Operating Income Statement for the 1,500 boats they normally sell in a year:

Sales Variable Manufacturing Costs Fixed Manufacturing Costs Gross Profit Variable Selling Expense

Neptune Inc. has asked Poseidon Co. for a special order of 10 boats for their touring company. To make the boats, Poseidon Co. will have to spend $15,000 on a machine part they will never use again but they won’t have to pay any selling costs for these units.

Questions

Should Poseidon Co. take the order if Neptune Inc. offers to pay $30,000 for the ten boats?

Why or why not?

Sales Variable Manufacturing Costs Fixed Manufacturing Costs Gross Profit Variable Selling Expense Fixed Selling Expense Operating Income $5,550,000 2,175,000 1,470,000 $1,905,000 315,000 840,000 750,000

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