Kintectics Ltd can manufacture 480,000 electrical pumps a year at a variable cost of $15 per pump and fixed costs of $500,000. Kintectics Ltd budgeted that it can sell 400,000 at $25 each. An additional order of 100,000 was received, but at a discount of 35% from the regular price. If Kintectics Ltd accepts the special order, profit before taxes will:

Question

Quizplus · Accepted Answer

The additional order will increase sales by $100,000 * 25 * 0.65 = $162,500. The variable cost will increase by $100,000 * 15 = $150,000. The profit before taxes will increase by $162,500 - $150,000 = $12,500.

Kintectics Ltd Can Manufacture 480,000 Electrical Pumps a Year at a Variable