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Leona [35]
3 years ago
9

Walnut has received a special order for 2,700 units of its product at a special price of $200. The product normally sells for $2

60 and has the following manufacturing costs: Per unit Direct materials $ 64 Direct labor 34 Variable manufacturing overhead 44 Fixed manufacturing overhead 103 Unit cost $ 245 Walnut is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Walnut accepts the order, what effect will the order have on the company’s short-term profit?
a. $162,000 decrease
b. $121,500 increase
c. $121,500 decrease
d. Zero.
Business
1 answer:
kondor19780726 [428]3 years ago
5 0

Answer:

a. $162,000 decrease

Explanation:

Sales                                                                          $540,000

(2700 unit * $200)

Less:

Direct materials                                  $172,800

(2700 unit * 64)

Direct labor                                         $91,800

(2,700 unit * $34)

Variable manufacturing overhead     $118,800

(2700 unit * $44)

Contribution loss from existing sale  <u>$318,600</u>       <u>$702,000</u>

2700 unit * ($260-$64-$34-$44)

Effect on Net operating income                              <u>-$162,000</u>

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Explanation:

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The monetary base in an economy is equal to all currency in circulation plus reserves held by banks.  

In other words, it includes highly liquid funds such as coins, notes, and bank deposits.  

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