Manor, Inc. which has excess capacity, received a special order for 4000 units at a price of $15 per unit. Currently, production and sales are budgeted for 10,000 units without considering the special order. Budget information for the current year follows:
Less: CGS 152,000
Gross Margin $38,000
Cost of goods sold includes $20,000 of fixed manufacturing cost. If the special order is accepted, the company's income will (increase)(decrease) by: ?© BrainMass Inc. brainmass.com June 3, 2020, 10:09 pm ad1c9bdddf
Since there is excess capacity, the relevant costs are the variable costs since the fixed cost will not change. The ...
The solution explains how to calculate how a special order will impact a companies net income.