C O ezto mheducation.com/hm.tpx s1Hawkes Learning Blackboard Leam Welcome-myutrg

Question

C O ezto mheducation.com/hm.tpx s1Hawkes Learning Blackboard Leam Welcome-myutrg Cinemark Theatres G Work in Japant Ga Potter has received a special order for 16,000 units of its product at a special price of $19. The product normally sells for $26 and has the following Per unit s 9 Direct materials Direct labor Variable manufecturing overhead Fixed manufecturing overhead $ 21 Unit cost Potter is currently operating at ful copacity and cannot fill the order without harming normal production and sales. If Potter accepts the order what effect vwill the order have on the company's short-term profit? O $16.000 decrease O $112.000 decrease $16.000 increase O$96.000 increase 159 PM 4/15/2018 D Type here to search

Explanation / Answer

Ans: b) $ 112000 Decrease

Solution: Contribution lost on existing order = (Sales price -Variable cost) x Units Sold

                                                                                =(26-18) x 16000 = $ 128000

Contribution earned on new order = (Sales price -Variable cost) x Units Sold

                                                                                =(19-18) x 16000 = $ 16000

Net Loss = $ 128000-16000= $ 112000

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