Reference no: EM133093406

Question - Assume a company manufactures many products, one of which normally sells for $48 per unit the companies accounting system reports the following unit product cost for this product:

Direct material $18 per unit, direct labor $12 per unit, manufacturing overhead at $10 per unit add total cost $40 per unit. The company estimates the three dollars of its manufacturing overhead varies with respect to the number of units produced. The remainder of its overhead is fixed and unaffected by the volume of units produced within the relevant range. A customer has approached the company with an offer to buy 300 Units of a customized version of the product mentioned above for $39 the company can fulfill this order using existing manufacturing capacity. To accommodate the customers desired product design the company would incur additional direct material cost per unit of a three dollars. It would also have to Buy a special tool for $430 that has no other use or resale value after the special order is completed.

Assuming that excepting this order will not have any affect on sales to other customers, what is a Financial advantage or disadvantage of excepting the special offer?