Carson Manufacturing, Inc., sells a single product for $40 per unit. At an opera

Question

Carson Manufacturing, Inc., sells a single product for $40 per unit. At an operating level of 8,000 units, variable costs are $18 per unit and fixed costs $10 per unit. Carson has been offered a price of $24 per unit on a special order of 2,000 units by Big Mart Discount Stores, which would use its own brand name on the item. If Carson accepts the order, material cost will be $3 less per unit than for regular production. However, special stamping equipment costing $12,000 would be needed to process the order; the equipment would then be discarded. Assuming that volume remains within the relevant range, prepare an analysis of differential revenue and costs to determine whether Carson should accept the special order. Use a negative sign with answer to only indicate an income loss from special order; otherwise do not use negative signs with your answers. Special Order Differential Analysis Differential revenue $Answer Differential variable costs Answer Equipment cost Answer Additional income (loss) from special order $Answer

Explanation / Answer

prepare an analysis of differential revenue and costs to determine whether Carson should accept the special order

Carson should accept the special order.

Differential revenue (2000*24) 48000 Differential cost Variable cost (2000*15) (30000) Special equipment (12000) Total differential cost (42000) Additional income 6000

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