Reference no: EM132882891

Collins Co. produces 10,000 units of sewing machines annually. Per unit data are given below:

Selling price$100

Direct materials, direct labor, and variable manufacturing overhead 35

Fixed manufacturing overhead 15

Variable selling and administrative expenses 20

Fixed selling and administrative expenses 10

Problem 1: The company has received a special, one-time-only order for 800 units of the product with a selling price of $70. There would be a 60% reduction in variable selling and administrative expenses on this special order. In addition, total fixed manufacturing overhead and total fixed selling and administrative expenses of the company would not be affected by the order. If Collins Co. accepts the order, it will have no effect on other customers. What is the financial advantage or disadvantage of accepting the special order?

Multiple Choice

Option 1: $21,600 financial advantage
Option 2: $8,000 financial disadvantage
Option 3: $18,400 financial advantage
Option 4: $24,000 financial disadvantage