Preston Wade Preston Wade, a local craftsman, normally sells his handcrafted woo

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Preston Wade
Preston Wade, a local craftsman, normally sells his handcrafted wooden birdhouses for $145 each. Preston has the capacity to produce as many as 60 birdhouses a week. In a normal week, Preston makes 20 birdhouses with the following costs per unit:

Direct materials

$12.00

Direct labor

$15.00

Variable overhead

$3.00

Fixed overhead

$5.00

Refer to the Preston Wade information above. Preston has received a special order from a local plant nursery to purchase 40 birdhouses for a price of $80 each. The nursery wishes to have the birdhouses engraved with their own logo, therefore, the order would require the rental of a special engraving tool at a cost of $250. If Preston accepts the special order, net income will increase by:

a. $2,000

b. $1,050

c. $3,200

d. $1,750

Preston Wade
Preston Wade, a local craftsman, normally sells his handcrafted wooden birdhouses for $145 each. Preston has the capacity to produce as many as 60 birdhouses a week. In a normal week, Preston makes 20 birdhouses with the following costs per unit:

Direct materials

$12.00

Direct labor

$15.00

Variable overhead

$3.00

Fixed overhead

$5.00

Explanation / Answer

c. $3,200

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