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What is the total relevant cost of filling this special sale

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Question - Robert Inc. is selling 30,000 bags of its product and the full capacity is 32,000 bags per month. Robert received a request for a special order of 7,000 bags from Hamilton Corp.. The total special selling price for the order was $190,000. There would be no variable selling costs but there would be a one-time $3,500 packing and delivery cost for Robert. The following information is provided about Robert's current operations:

Sales and production cost data for 30,000 bags, per bag: Sales price $45

Variable manufacturing costs 14

Variable selling costs 3

Fixed manufacturing costs 20

Fixed marketing costs 5

Assume there would be no other costs associated with the special order. Hamilton requires that Robert fill the entire order of 7,000 bags.

Required -

1. What is the total relevant cost of filling this special sales order?

2. What would be the change in operating income if the special order is accepted?

Reference no: EM132733537

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