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What is the incremental impact on its total profit

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Question - CWB Inc. is a toy company.

Normal selling price per unit $25

Variable cost per unit $18

Fixed cost per unit $1.4

A retailer has offered to purchase 2,000 toys at $20 for a one-time order. As there would be no sales commission paid on this special order, CWB Inc. can save $2 per unit in the variable cost if it accepts this order. There is no change in fixed costs.

(a) Assume that CWB Inc. has idle capacity necessary to accommodate the special order. If CWB accepts this special order, what is the incremental impact on its total profit? (i.e., the profit would increase/decrease by $__)

(b) Assume that CWB Inc. is operating at the full capacity such that it has to sacrifice normal sales to meet the demand of this special order. What is the incremental impact on its profit if it accepts this special order (i.e., the profit would increase/decrease by $__)?

Reference no: EM133149342

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