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Incremental revenue with Proposed Special Order

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Core Manufacturing makes a single product. Budget information regarding the current period is given below:

Revenue (100,000 units at $8.00) $800,000
Direct materials $170,000
Direct labor 125,000
Variable manufacturing overhead 235,000
Fixed manufacturing overhead 110,000 640,000
Total $160,000
Deer Company approaches Core with a special order for 15,000 units at a price of $8.50 per unit. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company's orders. However, Core is operating at capacity and will incur an additional $55,000 in fixed manufacturing overhead if the order is accepted. What is the incremental revenue associated with accepting the special order?

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Solution Summary

This solution depicts the steps to calculate the incremental revenue associated with the proposed special order.

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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