Solution-Should audio company accept this one-time special

Should audio company accept this one-time special order

Reference no: EM132776108

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: EM132776108

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Should audio company accept this one-time special order

Reference no: EM132776108

Reference no: EM132776108

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