Reference no: EM139614

Q: Anderson Manufacturing makes a single product.  Budget information regarding the current period is given below:

Revenue (100,000 units at $8.00)	$800,000
Direct materials	150,000
Direct labor	125,000
Variable manufacturing overhead	235,000
Fixed manufacturing overhead	110,000
Net income	$180,000

Dye Company approaches Anderson with a special order for 15,000 units at a price of $7.50 per unit. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company's orders.  However, Anderson is operating at capacity and will incur an additional $50,000 in fixed manufacturing overhead if the order is accepted.

1.  What is the incremental income (loss) associated with accepting the special order?

a)     ($14,000)

b)    $36,000

c)     ($23,500)

d)    $27,000

2.  What is the incremental revenue associated with accepting the special order?

a)     $170,000

b)    $112,500

c)     $70,000

d)    $120,000