Question #$4$

Torque Master Tools produced and sold $47,630$ Nematic Socket Torque Wrenches

and is operating at only $40\%$ of plant capacity. Unit information about its product

is as follows:

Sales price

Variable manufacturing cost

Fixed manufacturing cost $($$$571,56047,630)$

Profit per unit

The company received a proposal from a company to buy $8,000$ Nematic Socket

Torque Wrenches for $$89$ each. This is a one$-$time only order and acceptance of this

proposal will not affect the company's regular sales. The president of Torque

Master Tools, Inc. Andy Granatelli, is reluctant to accept the proposal because he

is concerned that the company will lose money on the special order.

Required:

Prepare an incremental analysis of this proposal and indicate the effect the

acceptance of this order would have on the company's income.

What qualitative factors should Mr$.$ Granatelli take into consideration?