The adjacent manufacturer produces only one product. The normal activity level of the company is 32,000 units per month. Cost data for producing and selling a single unit of this product is shown below:

Direct materials	$20.20
direct labor	$8.20
Variable production load	$1.20
Fixed production load	$10.80
Variable selling and administrative expense	$2.10
Fixed selling and administrative expense	$6.20

The regular selling price of the product is $50.50 per unit.
Received an overseas order of 2,200 from a company for delivery this month at a special discounted price. This order will have no effect on the company's normal sales and will not change the total amount of the company's fixed costs. The variable selling and administrative expense on this order will be $0.40 less per unit than normal domestic sales.
Direct labor is a variable cost in this company.

Suppose there is enough idle capacity to produce the units the foreign customer needs, and the special discount price on the special order is $44.80 per unit. How much would this special order increase (decrease) the company's monthly net operating income?

Answer rating: 100% (QA)

To calculate the increase or decrease in the companys monthly net operating income due to the specia... View the full answer