(SHOW ALL COMPUTATIONS or no credit given) 8 (6points) Pfizer Company produced a

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(SHOW ALL COMPUTATIONS or no credit given)

8 (6points) Pfizer Company produced and sold 10,000 units of product and is operating at 75% of plant capacity. Unit information about its product is as follows: Sales Price Variable manufacturing cost Fixed manufacturing cost ($190,00010,000) Profit per unit $47 $15 19 34 $13 The company received a proposal from a foreign company to buy 3,070 units of Pfizer Company's product for $25 per unit. Pfizer will incur special shipping costs of $2 per unit. This is a one-time only order and acceptance of this proposal will not affect the company's regular sales. The president of Pfizer Company is reluctant to accept the proposal because he is concerned that the company will lose money on the special order. Instructions (a) Should Pfizer accept/reject this order (b) and why? Support your answer with computations

Explanation / Answer

a) Incremental analysis :

b) Company should accept special order because special order give incremental profit of a company $24560

Incremental revenue (3070*25) 76750 Incremental cost Variable manufacturing cost (3070*15) -46050 Shipping cost (3070*2) -6140 Total incremental cost -52190 Incremental profit (loss) 24560

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