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What would be the effect on Swifty income

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Reference no: EM133018469

Question - Swifty Company is a leading manufacturer of sunglasses. One of Swifty's products protects the eyes from ultraviolet rays. An upscale sporting goods store has contacted Swifty about purchasing 29,800 pairs of these sunglasses. Swifty's unit manufacturing cost, based on a full capacity of 253,000 units, is as follows:

Direct materials $6

Direct labor $4

Manufacturing overhead (75% fixed) $20

Total manufacturing costs $30

Swifty also incurs selling and administrative expenses of $75,300 plus $2 per pair for sales commissions. The company has plenty of excess manufacturing capacity to use in manufacturing the sunglasses. Swifty's normal price for these sunglasses is $40 per pair. The sporting goods store has offered to pay $34 per pair. Since the special order was initiated by the sporting goods store, no sales commission will be paid.

What would be the effect on Swifty's income if the special order were accepted?

Reference no: EM133018469

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