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First image has a plant capacity of 80,000 units per month. current monthly sales are 76,000 units at the price of $22 each.
Unit costs are:
Direct material 3
Direct labour 4
varaible overhead 1.5
fixed ovehead 2
admin& marketing- variable 1.8
admin and marketing- fixed 3.5
total 15.80
Computer output management has contacted first image about one-time order to purchase 10,000 at $16 each. The varaible admin and marketing cost for the order would be reduced by $1. A special machine costing $5,000 needs to be purchased to print the logo that the costumer wants.
Question 1: Determine whether or not first image should accept the order. if the order is accepted, what is the impact on the company's overall profit?
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