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Impact of special order

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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:
Sales $190,000
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: ?

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Solution Summary

The solution explains how to calculate how a special order will impact a companies net income.

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Since there is excess capacity, the relevant costs are the variable costs since the fixed cost will not change. The ...

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