A local manufacturer has been approached to supply a special order for 500 ceramic vases at a price of $20 per vase.The current cost of producing the vases is made up of direct materials of $10 per vase,direct labour costs of $8 per vase,direct overhead costs of $5 per vase plus fixed overhead costs of $5 each.The company has sufficient spare capacity to manufacture the order without affecting its normal production.Should they accept the order?

Question

Quizplus · Accepted Answer

The business will incur a loss of $4 000 from the special order. Selling price of $20 per vase compared to total costs per vase $28. Incremental income is $20 x 500 = $10 000 compared to incremental costs of $28 x 500 = $14 000

A Local Manufacturer Has Been Approached to Supply a Special