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Determining the incremental revenues

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A company is considering a special order from Gadget Inc. for 15,000 units at a price of $35.00 per unit. The company's product normally sells for $47.00 per unit and has variable manufacturing costs of $18.00 per unit and variable selling costs of $3.50 per unit. Fixed manufacturing costs are $450,000 and fixed selling and administrative costs are $225,000. Budget Enterprises has the capacity to produce 120,000 units and is currently producing 85,000. If Budget accepts the order, it will incur legal and accounting fees of $8,000 in connection with the order. Variable selling costs will not be incurred on the special order and it will not any other impact on its other operations.

a. How much are the incremental revenues associated with the special order?

b. How much are the incremental costs associated with the special order?

c. How much additional profit or loss will be incurred if the order is accepted AND should it accept the order?

Reference no: EM131097888

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