Should jill company accept the special order

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Reference no: EM132561279

Jill's Company has been approached by a new customer with an offer to purchase 6,000 units of your product at a price of $11 per unit. Your existing sales will not be affected by this special order. Jill's Company normally produce 40,000 units but plan to produce and sell 30,000 in the coming year. The normal sales price is $18 per unit.

Unit cost information is as follows:

Direct materials $4.00

Direct labor $2.75

Variable overhead $1.50

Fixed overhead $3.25

Total $11.50

If Jill's Company accepts this special order, its fixed manufacturing activities will not be affected.

Question 1. By how much will profit increase or decrease if the special order is accepted?

Question 2. Should Jill's Company accept this special order? Explain why and show your calculations.

Reference no: EM132561279

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