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    Quick Rite Company - company's profit if the order is accepted

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    Quick-Rite Company manufactures computers. The following cost information for the manufacture of one computer has been compiled:

    Direct Materials $48
    Direct Labor $64
    Variable manufacturing overhead $36
    Variable selling & administrative expenses $12
    Fixed manufacturing overhead $32*

    *amount reflects application of unavoidable costs applied to all products based on a predetermined per unit rate

    If quick rite receives a special order for 500 computers at a price of $175, what will be the effect on the company's profit if the order is accepted? (Assume that other variables do not change)

    a) profit increases of 7500
    b) profit increases of 14500
    c) profit increases of 12500
    d) profit decreases of 6500

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    Solution Preview

    Relevant costs are
    Direct Materials $48
    Direct Labor ...

    Solution Summary

    The solution examines Quick Rite Company's profit in order to accept the manufactures computers.