Excellent Manufacturers Inc.has a current production level of 20,000 units per month.Unit costs at this level are:

Current monthly sales are 18,000 units.Jax Company has contacted Excellent about purchasing 1,550 units at $2.00 each.Current sales would NOT be affected by the one-time-only special order,and variable marketing/distribution costs would NOT be incurred on the special order.What is Ratzlaff Company's change in operating profits if the special order is accepted?

Question

Excellent Manufacturers Inc.has a current production level of 20,000 units per month.Unit costs at this level are:

Current monthly sales are 18,000 units.Jax Company has contacted Excellent about purchasing 1,550 units at $2.00 each.Current sales would NOT be affected by the one-time-only special order,and variable marketing/distribution costs would NOT be incurred on the special order.What is Ratzlaff Company's change in operating profits if the special order is accepted?

Quizplus · Accepted Answer

Manufacturing cost per unit = $0.26 + $0.40 + $0.16 = $0.82 Increase in operating profits = 1,550 × ($2.00 - $0.82)
= $1,829.00 increase