Question

Brike Company, which manufactures one product - robes, has enough idle capacity available to accept a special order of 10,000 robes at $9 a robe. A predicted income statement for the year, without this special order is as follows:
	Sales revenue	$12.50	$1,250,000
	Manufacturing costs:
	Variable	6.25	625,000
	Fixed	1.75	175,000
		8.00	800,000
	Gross profit	4.50	450,000
	Marketing costs:
	Variable	1.80	180,000
	Fixed	1.45	145,000
		3.25	325,000
	Operating profit	$ 1.25	$ 125,000
If the order is accepted, variable marketing costs on the special order would be reduced by 25 percent because all of the robes would be packed and shipped in one lot. However, if the offer is accepted, management estimates that it will lose the sale of 2,000 robes at regular prices. What is the net gain or loss from the special order?

Answer 1

Net gain for accepting the special order is $ 5,100.

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