Australia Company manufactures sonars for fishing boats.Model 70 sells for $250.Australia produces and sells 5,600 of them per year.Cost data are as follows:

A potential deal has come up for a one-time sale of 32 units at a special price of $120 per unit.The marketing manager states that the sale will not negatively impact the company's regular sales activities and will require the normal variable manufacturing costs and selling and administrative costs.The production manager states that there is plenty of excess capacity and the deal will not impact fixed costs.The controller points out,however,that because the expected increase in revenues are equal to the expected increase in costs to fill the order,the deal will not have any impact on the bottom line.The controller is correct in his statement.

Question

Australia Company manufactures sonars for fishing boats.Model 70 sells for $250.Australia produces and sells 5,600 of them per year.Cost data are as follows:
  
A potential deal has come up for a one-time sale of 32 units at a special price of $120 per unit.The marketing manager states that the sale will not negatively impact the company's regular sales activities and will require the normal variable manufacturing costs and selling and administrative costs.The production manager states that there is plenty of excess capacity and the deal will not impact fixed costs.The controller points out,however,that because the expected increase in revenues are equal to the expected increase in costs to fill the order,the deal will not have any impact on the bottom line.The controller is correct in his statement.

Quizplus · Accepted Answer

11ea8a42_4fbb_21c6_8b44_0d7213cb0fce_TB5024_00 Less: Expected increase in costs
 11ea8a42_4fbb_21c7_8b44_8d4083bf208a_TB5024_00

Australia Company Manufactures Sonars for Fishing Boats