What would be the impact on monthly profits

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Reference no: EM13127297

The Crimson Tide Company produces T-shirts promoting the University of Alabama to various retailers. The costs of producing and selling a single T-shirt at the company's current activity level of 10,000 units per month are:

Direct Materials $3.00
Direct Labor 2.50
Variable Manufacturing Overhead 1.00
Fixed Manufacturing Overhead 4.00
Variable Selling and Administrative Expenses 2.00
Fixed Selling and Administrative Expenses 1.00

The normal selling price is $18 per unit. The company's capacity is 12,000 units per month. Due to the University of Alabama participating in the BCS National Championship Game, an order has been received from a retailer for 2,000 additional T-shirts at $14 per unit. This order would not affect regular sales and would not change the company's total fixed costs.

Ignore the impact of income taxes in your calculation.

Should the order be accepted? What would be the impact on monthly profits?

Reference no: EM13127297

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