Melville Company makes special equipment used in cell towers.Each unit sells for $420.Melville produces and sells 12,700 units per year.They have provided the following income statement data:

A foreign company has offered to buy 75 units for a reduced sales price of $320 per unit.The marketing manager says the sale will not affect the company's regular sales.The sales manager says that this sale will require incremental selling and administrative costs,as it is a one-time deal.The production manager reports that it would require an additional $30,000 of fixed manufacturing costs to accommodate the specifications of the buyer.If Melville accepts the deal,how will this impact operating income? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )

Question

Melville Company makes special equipment used in cell towers.Each unit sells for $420.Melville produces and sells 12,700 units per year.They have provided the following income statement data:

A foreign company has offered to buy 75 units for a reduced sales price of $320 per unit.The marketing manager says the sale will not affect the company's regular sales.The sales manager says that this sale will require incremental selling and administrative costs,as it is a one-time deal.The production manager reports that it would require an additional $30,000 of fixed manufacturing costs to accommodate the specifications of the buyer.If Melville accepts the deal,how will this impact operating income? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )

Quizplus · Accepted Answer

B)
 11ea8a42_4fbc_5a5c_8b44_c7a9c4677908_TB5024_00 Less: expected increase in costs
 11ea8a42_4fbc_5a5d_8b44_e7c12aa5c8d1_TB5024_00 *Variable manufacturing cost per unit = 800,000 / 12,700 = $62.99
**Variable selling and administrative expenses per unit = 500,000 / 12,700 = $39.37

Melville Company Makes Special Equipment Used in Cell Towers