Determine the effect on profit if special order is accepted

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Question - SloGrowth has idle capacity. They have received a special order for 2,000 units at a price of $6 per unit. Currently production and sales are budgeted for 20,000 units without considering the special order. Budget information for the year is presented below:

Sales $160,000

Cost of goods sold $120,000

Gross margin $40,000

Cost of goods sold includes $20,000 of fixed manufacturing cost. Determine the effect on profit if the special order is accepted.

a. Remain the same.

b. Increase by $2,000.

c. Increase by $12,000.

d. Decrease by $2,000.

e. Decrease by $1,000.

Reference no: EM132749833

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