Reference no: EM132473339

Hard Timber Company ("HTC") is a furniture manufacturer. It makes unpainted tables at a cost of $280 each and sells them for $320 each. A customer wants to place an order to buy 800 black tables at $330 each. It costs an additional $30 each to paint the table black.

The current costs for manufacturing each unpainted table are shown in the table below:

Description                                              Cost

Direct materials                                 $120

Direct labour                                      $70

Variable overhead                               $40

Fixed overhead                                    $50

Question (a) Calculate the incremental gain/(loss) of accepting the customer's order if HTC has excess capacity. Comment on whether HTC should accept the order.

Question (b) Calculate the incremental gain/(loss) of accepting the customer's order if HTC does not have excess capacity. Comment on whether HTC should accept the order.