Answer:
While the special order generates a positive differential cost of $15
It should be rejected.
As this is an insignificant reward (15 / 1,000 = 1.5%)
considering the effort needed (300 / 2,000 = 15% production)
We increase production by 15% to increase our income by 1.5%
Any deviation from the expected cost will turn the project into a negative outcome the project is not useful for the current cost structure.
Explanation:
<u>MISSING INFORMATION</u>
TOTAL /// Per Unit
Sales revenue $10,000 $ 5.00
Costs of meals 8,000 4.00
Gross profit 2,000 1.00
Administrative costs 1,000 0.50
Operating profit 1,000 0.50
Fixed Cost
2,000 meal production
400 administrative cost
<em>Variable cost:</em>
unit sold: 10,000 / 5.00 = 2,000
Total Cost: 9,000
Less fixed of 2,400
Variable cost 6,600
6,600 / 2,000 units = 3.3 per unit
Special order:
Sales revenue 3.35 x 300 = 1,005
Cost per unit: 3.30 x 300 =<u> 990 </u>
revenue 15
