Answer:
Cranberry will have a financial advantage of $28,000 if it accepts the order
Explanation:
Note that "<em>Cranberry has sufficient capacity to fill the order without harming normal production and sales</em>" this means that the fixed costs will not change as production and sales remains in relevant range.
To determine the effect that the order will have on the company's short-term profit we consider Incremental Costs and Revenues that result from the special order.
<u>Incremental Costs and Revenues - special order for 100 units </u>
Sales ( 100 units × $2,100 per unit) $210,000
<em>Less </em>Cost of Sale : ($182,000)
Direct materials ( 100 units × $ 840 per unit) $84,000
Direct labor ( 100 units × $ 420 per unit) $42,000
Variable manufacturing overhead ( 100 units × $ 560 per unit) $56,000
Gross Profit $28,000
Therefore Cranberry will have a financial advantage of $28,000 if it accepts the order