A customer has requested that Daleske Corporation fill a special order for 2,000

Question

A customer has requested that Daleske Corporation fill a special order for 2,000 units of product D84 for $20.30 a unit. While the product would be modified slightly for the special order, product D84's normal unit product cost is $18.50:

Direct materials............................. $6.80
Direct labor.................................. $3.40
Variable manufacturing overhead........ $7.00
Fixed Manufacturing overhead............ $1.30
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Unit Cost..................................... $18.50

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product D84 that would increase the variable costs by $2.50 per unit and that would require an investment of $7,000 in special molds that would have no salvage value.
This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by:

A: ($14,900)
B: ($5,800)
C: $3,600
D: ($8,400)

Explanation / Answer

40,600 revenue (20.30*2000) -13,600 DM (6.80*2000) -6,800 DL (3.4*2000) -19,000 VOH (9.50*2000) -7000 special molds =-5,800 Answer: B, ($5,800)

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