Wharton Company has the capacity to produce 50.000 units per year The company se

Question

Wharton Company has the capacity to produce 50.000 units per year The company sells each Budgeted information is as follows: Revenues $5,612.000 Direct materials $51,932.000 Direct labor 552.000 Manufacturing overhead (fixed) 276.000 Manufacturing overhead (variable) 552.000 3,312,000 Total $2,300.000 A special order has been received for 5,000 units to be sold for $80 per unit The company would incur an additional $60,000 in total fixed costs in order to lease a special machine in order to make a slight modification to the original product Should the company accept the special order? No, accepting this order would decrease profits to $2,263,600 O No. total costs would increase by $303,600 O Yes. the revenue will increase substantially Yes, profit Will increase by $36,400.

Explanation / Answer

  REVENUES = 400000 (5000*80)

(-) DIRECT MATERIALS = 193200

(-) DIRECT LABOUR = 55200

(-) MANUFACTURING O/H (F) = 276000

(-) MANUFACTURING O/H (V) = 55200

(-) ADDITIONAL COST (F) = 60000

   TOTAL = (239600)

NO COMPANY SHOULD NOT ACCEPT AS IT IS DECRESING PROFITS BY $2263600

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