Special Order Carson Manufacturing, Inc., sells a single product for $43 per unit. At an operating level of 8,000 units, variable costs are $18 per unit and fixed costs $10 per unit. Carson has been offered a price of $27 per unit on a special order of 2,000 units by Big Mart Discount Stores, which would use its own brand name on the item. If Carson accepts the order, material cost will be $2 less per unit than for regular production. However, special stamping equipment costing $14,000 would be ne

Question

Business

Jerome Livingston

11 July, 11:41

Special Order Carson Manufacturing, Inc., sells a single product for $43 per unit. At an operating level of 8,000 units, variable costs are $18 per unit and fixed costs $10 per unit. Carson has been offered a price of $27 per unit on a special order of 2,000 units by Big Mart Discount Stores, which would use its own brand name on the item. If Carson accepts the order, material cost will be $2 less per unit than for regular production. However, special stamping equipment costing $14,000 would be ne

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Answers (1)

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Alisa Watson · Answer 1

It would be convinient to accept the order as it will increase the operating income by $4,000

Explanation:

Special order unit cost:

sales price 27

variable cost (18 - 2) 16

contribution 9

2,000 units x $9 = 18,000 contribution

special equipment (14,000)

net result: 4,000