Answer: See explanation
Explanation:
a. The variable cost per unit will be:
= (3,825,000 - 3,680,000) / (45million - 40 million)
= 0.029
Then, the financial order of accepting the order will be:
Contribution margin = Unit selling price - Unit
= 65 - 29
= 36
Since the size of the order is 100,000, the financial impact of accepting the order will be:
= 36 × 100,000
= 3,600,000
b. The differential analysis will be:
Contribution from special order = 3,600,000
Opportunity cost {100,000 = 120,000,000 - 29,000,000 = 9,100,000
Net disadvantage of accepting order will then be:
= 3600000 - 9100000
= 5,500,000
