Capitol has received a special order for 2,000 units of its product at a special price of $195. The product normally sells for $260 and has the following manufacturing costs: Assume that Capitol has sufficient capacity to fill the order without harming normal production and sales and all fixed overhead is unavoidable.
a. If Capital accepts the order, what effect will the order have on the company's short-term profit?
b. What minimum price should Capital charge to achieve a $65,000 incremental profit?
c. Now assume Capital is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Capitol accepts the order, what effect will the order have on the company's short-term profit?

Question

Capitol has received a special order for 2,000 units of its product at a special price of $195. The product normally sells for $260 and has the following manufacturing costs:  Assume that Capitol has sufficient capacity to fill the order without harming normal production and sales and all fixed overhead is unavoidable.
a. If Capital accepts the order, what effect will the order have on the company's short-term profit?
b. What minimum price should Capital charge to achieve a $65,000 incremental profit?
c. Now assume Capital is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Capitol accepts the order, what effect will the order have on the company's short-term profit?

Quizplus · Accepted Answer

The Answer of Capitol has received a special order for 2,000 units of its product at a special price of $195. The product normally sells for $260 and has the following manufacturing costs:  Assume that Capitol has sufficient capacity to fill the order without harming normal production and sales and all fixed overhead is unavoidable.
a. If Capital accepts the order, what effect will the order have on the company's short-term profit?
b. What minimum price should Capital charge to achieve a $65,000 incremental profit?
c. Now assume Capital is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Capitol accepts the order, what effect will the order have on the company's short-term profit?

Capitol Has Received a Special Order for 2,000 Units of Its