A TV company produces wall mounts for flat screen tv\'s. The forecasted income s

Question

A TV company produces wall mounts for flat screen tv's. The forecasted income statement for 2009 follows:
Sales ($48 per unit) $4,800,000
Cost of good sold ($32 per unit) (3,200,000)
Gross profit 1,600,000
Selling expenses ($4 per unit) (400,000)
Net income $1,200,000

More info:
a. of the production costs and selling expenses, $800,000 and $100,000 respectively are fixed. b. The tv company received a special order from a hospital company offering to buy 13,000 wall mounts for $30. If they accept the order, there will be no additional selling expenses and there is currently sufficient excess capacity to fill the order. The company's sales manager wants to reject the order because "they're not in the business to of paying $32 to make a product then sell it for $30.

Calculate the net benefit of accepting the special order.

Explanation / Answer

Of the production cost $800,000 is fixed expense. Hence for producing the additional 13,000 mounts, the production cost is : 13000*(3,200,000-800,000)/100,000 = 312,000 Net Benefit = 13000*30 - 312000 = $78,000

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