Jerston Company has an annual plant capacity of 4,600 units. Data concerning thi

Question

Jerston Company has an annual plant capacity of 4,600 units. Data concerning this product are given below:

   

    

The company has received a special order for 100 units at a selling price of $115 each. Regular sales would not be affected, and sales commissions on the 100 units would be reduced by one-third. This special order would have no impact on total fixed costs.

  

Determine the net advantage (disadvantage) for the special order. (Input the amount as a positive value.)

Jerston Company has an annual plant capacity of 4,600 units. Data concerning this product are given below:

Explanation / Answer

a) Incremental analysis :

b) Yes, The company should accept the special order

Incremental revenue (100*115) 11500 Incremental cost Variable manufacturing (48*100) 4800 Variable sale commission (12*2/3)*100 800 Total incremental cost 5600 Incremental profit 5900

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