Reference no: EM132772098

Question - Below are Rubble Co.'s per unit costs of producing and selling 25,000 units of their product per month. Assume this level of production represents 60% capacity.

Manufacturing:

Direct materials $2.00

Direct labor $7.00

Variable overhead $1.50

Fixed overhead $3.00

Selling and administrative:

Variable $1.50

Fixed $2.50

Present production and sales amount to 25,000 units per month. The selling price on each regular unit sold is $30 per unit. A special order has been received from a customer for 3,500 units. The order would not affect regular sales. Total fixed costs, both fixed overhead and fixed selling and administrative, would not be affected by this special order. In addition to all variable manufacturing costs being incurred on each unit of this special order, $0.50 of variable selling and administrative costs would also be incurred on each unit in this special order.

Required - What is the financial advantage (disadvantage) for the company from this special order if it charges the customer $18 per unit on the special order units?

a. ($38,500)

b. ($42,000)

c. $1,750

d. $8,750

e. $24,500