Reference no: EM132009625

Special Order Problem -

Z-Tech produces a single product. The cost of producing and selling a single unit of this product at the company's current activity level of 8,000 units per month is as follows:

Cost                                           Per Unit

Direct materials . . . . . . . . . . . . . . $2.50

Direct labor. . . . . . . . . . . . . . . . . . $3.00

Variable manufacturing overhead $0.50

Fixed manufacturing overhead. . $4.25

Variable selling & administrative $1.50

Fixed selling & administrative. . . $2.00

The normal selling price is $15 per unit. The company's capacity is 10,000 units per month. An order has been received from an overseas source for 2,000 units at t price of $12 per unit. This would would not affect regular sales.

Required: If the order is accepted, by how much will monthly profits be increased or decreased? Show your computations.