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What be effect on profit of accepting order for duffy dog

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Duffy Dog produces a hard disk drive that sells for $172 per unit. The cost of producing 25,000 drives in the prior year was:

Direct Materials $700,000
Direct Labor 475,000
Variable O/H 225,000
Fixed O/H 1,475,000
Total Costs $2,875,000

At the start of the current year, the company received an order for 3,150 drives from a computer company in China. Management of Duffy Dog has mixed feelings about the order. On one hand, they welcome the order because they currently have excess capacity. Also, this is the company's first international order. On the other hand, the company in China is willing to pay only $134 per unit.

Problem 1: What will be the effect on profit of accepting the order?

Reference no: EM132841029

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