MCG Manufacturing Company has a normal plant capacity of 27,000 units per month. Because of an excess quantity of inventory on hand, it expects to produce only 20,000 units in October. Monthly fixed costs and expenses are $108,000 ($4 per unit at normal plant capacity) and variable costs and expenses are $12.00 per unit. The present selling price is $28.00 per unit. Consider each of the following independent assumptions and prepare a differential analysis for each to determine if the special order should be accepted.
a. The company has an opportunity to sell 7,000 additional units at $20.00 per unit to a business that plans to market the product under its own brand in a foreign market. Determine the incremental income or loss MCG Manufacturing could realize by accepting this special order.
b. Now assume that the company has an opportunity to sell 7,000 additional units at $20.00 per unit to a business that plans to market the product under its own brand in a foreign market. Now, though, the special-order request includes customization which will add $3 of variable costs per unit. Determine the incremental income or loss MCG Manufacturing could realize by accepting this special order.
c. Assume that the company has an opportunity to sell 6,000 additional units at $15.00 per unit to a business that plans to market the product under its own brand in a foreign market. Now, though, the special-order request includes additional shipping overseas which will add $4.50 of variable costs per unit. Determine the incremental income or loss MCG Manufacturing could realize by accepting this special order.

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The Answer of MCG Manufacturing Company has a normal plant capacity of 27,000 units per month. Because of an excess quantity of inventory on hand, it expects to produce only 20,000 units in October. Monthly fixed costs and expenses are $108,000 ($4 per unit at normal plant capacity) and variable costs and expenses are $12.00 per unit. The present selling price is $28.00 per unit. Consider each of the following independent assumptions and prepare a differential analysis for each to determine if the special order should be accepted.
a. The company has an opportunity to sell 7,000 additional units at $20.00 per unit to a business that plans to market the product under its own brand in a foreign market. Determine the incremental income or loss MCG Manufacturing could realize by accepting this special order.
b. Now assume that the company has an opportunity to sell 7,000 additional units at $20.00 per unit to a business that plans to market the product under its own brand in a foreign market. Now, though, the special-order request includes customization which will add $3 of variable costs per unit. Determine the incremental income or loss MCG Manufacturing could realize by accepting this special order.
c. Assume that the company has an opportunity to sell 6,000 additional units at $15.00 per unit to a business that plans to market the product under its own brand in a foreign market. Now, though, the special-order request includes additional shipping overseas which will add $4.50 of variable costs per unit. Determine the incremental income or loss MCG Manufacturing could realize by accepting this special order.

MCG Manufacturing Company Has a Normal Plant Capacity of 27,000