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What be effect on profit of accepting order for runner

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Reference no: EM132957449

Runner produces a hard disk drive that sells for $178 per unit. The cost of producing 25,000 drives in the prior year was:

Direct material $700,000
Direct labor 475,000
Variable overhead 225,000
Fixed overhead 1,475,000
Total cost $2,875,000

At the start of the current year, the company received an order for 3,290 drives from a computer company in China. Management of Runner 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 $128 per unit.

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

Reference no: EM132957449

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