Premier Industries has been offered a deal to supply 6,000 snowboards per year to Rebel Sports at $250 per snowboard. The company's full cost of production is $210 per snowboard. The normal sales price for a snowboard is $310.00. Variable costs per snowboard amount to $140.00. Premier Industries will have to supply the full order quantity, or none at all. Premier's current sales level is 18,000 snowboards per year, and has the capacity to produce 20,000 snowboards per annum.

Required:

1) Determine the impact on profitability, if the special order was to be accepted.

2) Explain the effect of fixed costs on this decision situation.

Answer rating: 100% (QA)

To determine the impact on profitability if the special order was to be accepted we need to calculate the incremental profit from accepting the specia... View the full answer