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Calculate the effect on profit

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Question - A telecommunications company has made an offer to buy 4,000 wireless modems for $35 each with the additional requirement that its logo be placed on each modem. OMG Wifmod Ltd now has some idle production capacity but will have to reduce the production of USB drives by 2,500 units if it accepts the order from the telecommunications company. It will also need to spend $7,500 to purchase the equipment required to place the telecommunications company logo on the modems.

This specialised equipment is only expected to have this one time use and has zero disposal value. Calculate the effect on profit that would be made if the offer was accepted. Show all workings.

Reference no: EM132476541

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