Glade Company produces a single product. The costs of producing and selling a si

Question

Glade Company produces a single product. The costs of producing and selling a single unit of this product at the company's current activity level of 8,900 units per month are: The normal selling price is $20 per unit. The company's capacity is 11,800 units per month. An order has been received from a potential customer overseas for 2,900 units at a price of $17.00 per unit. This order would not affect regular sales. If the order is accepted, by how much will monthly profits increase or decrease? (The order would not change the company's total fixed costs.) (Input the amount as a positive value. Omit the "$" sign in your response.) Assume the company has 500 units of this product left over from last year that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

1. is the order is accepted then the additional profit will be :

sale 2900*17 49300

variable cost 2900*(2.4+4+.8+1) (23780)

contribution 25520

monthly profit will increase by $25520

2.

variable selling and admin cost is the only relevant cost.

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