Solution-Should audio company accept the one-time special

Should audio company accept the one-time special order

Reference no: EM132792545

Audio Company produces sound systems for cars and sells them to auto manufacturers for $100 each. Full capacity is 20,000 systems per month but Audio Company is currently producing 18,000 systems per month for its regular customers. The company reports the following monthly results:

Per Unit Total

Revenue                              $100                $1,800,000

Direct Materials                        25                     450,000

Direct Manufacturing Labor           10             180,000

Variable Manufacturing Overhead        22            396,000

Fixed Manufacturing Overhead             3              54,000

Variable Selling expenses                  19              342,000

Fixed Selling expenses                      2               36,000

Total Costs                                 81              1,458,000

Operating income                            $19             $342,000

Problem 1: Audio's manager receives a call regarding a one-time special order. Ted's Automotive needs 2,000 systems and will pay $65 per system. There will be no selling expenses incurred for this special order. Should Audio Company accept this one-time special order? Show your calculations.

Reference no: EM132792545

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Should audio company accept the one-time special order

Reference no: EM132792545

Reference no: EM132792545

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