option b is 144000 option c 129000 CoolAir Corporation manufactures portable win

Question

option b is 144000

option c 129000

CoolAir Corporation manufactures portable window air conditioners. CoolAir has the capacity to manufacture and sell 80,000 air conditioners each year but is currently only manufacturing and selling 60,000. The following per unit numbers relate to annual operations at 60,000 units Per Unit $125 Selling price Manufacturing costs: Variable Fixed 25 $ 40 Selling and administrative costs: Variable Fixed $ 10 15 The City of Clear water would like to purchase 3,000 air conditioners from CoolAir but only if they can get them for $75 each. Variable selling and administrative costs on this special order will drop down to $2 per unit. This special order will not affect the 60,000 regular sales and it will not affect the total fixed costs. The annual financial advantage (disadvantage) for the company as a result of accepting this special order from the City of Clear water should be Multiple Choice $21,000)

Explanation / Answer

Calculate financial advantage for special order :

Financial advantage of $144000

Incremental revenue (3000*75) 225000 Less: Incremental cost Variable manufacturing cost (3000*25) (75000) Variable selling and administrative cost (3000*2) (6000) Incremental profit 144000

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