How much better or worse off is circus toys

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Question - Circus Toys produces a plastic three-ring circus set. The set sells for $102. The capacity of the plant is 20,000 sets per year. Production costs are as follows for 20,000 sets:


Per unit

Direct materials

$ 10.00

Direct labor

15.00

Variable overhead

20.00

Variable Selling costs

5.00

Fixed overhead

40.00

Total Cost

90.00

A Canadian store, which had previously not purchased from Circus Toys, has approached the marketing manager about buying 6,000 sets for $88/set. No selling expenses would be incurred in this offer, but the Canadian firm wants its store name put on the package, which means an additional $2.50 cost per unit to Circus Toys. Because the company is currently selling 19,000 sets, acceptance of this special order would require it to reject some of its current business.

Required - How much better or worse off is Circus Toys if they accept the special order? Show computations.

Reference no: EM133135150

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