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What effect will order have on company short-term profit

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Reference no: EM133140415

Question - Capitol has received a special order for 2,000 units of its product at a special price of $200. The product normally sells for $260 and has the following manufacturing costs:

Per unit

Direct materials $78

Direct labor 52

Variable manufacturing overhead 39

Fixed manufacturing overhead 65

Unit costs 234

Assume that Capitol has sufficient capacity to fill the order without harming normal production and sales and all fixed overhead is unavoidable.

1. If Capital accepts the order, what effect will the order have on the company's short-term profit?

2. What minimum price should Capital charge to achieve a $65,000 incremental profit?

3. Now assume Capital is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Capitol accepts the order, what effect will the order have on the company's short-term profit?

Reference no: EM133140415

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