ABC Company makes and sells 10,000 units of a certain product. The total manufacturing cost of goods made is Br400, 000. Suppose XYZ Company offered Br38 per unit for 1,000 units special order that:
Would not affect the regular business in any way
Would not affect fixed costs
Would not require any additional variable selling and administrative expenses
Would use some other wise idle manufacturing capacity
Required
Should ABC Company accept the special order?
The income statement of the company for the most recent period is given below:
Sales————————————————————-500,000
Variable costs
Manufacturing—————————-360,000
Selling and admin————————-30,000———–390,000
Contribution margin—————————————–110,000
Fixed costs
Manufacturing——————————40,000
Selling and admin————————–50,000———–90,000
Operating income———————————————-20,000