Answer:
increase of $283,058
Explanation:
Consider the incremental Costs and Revenues arising from accepting a special order.
The company has excess capacity therefore, the current fixed overheads would be irrelevant (will have been incurred whether or not the special order is accepted. Also fixed expenses are irrelevant since regular sales will not be affected by this special order.
Sales (9,500× 52) 494,000
Direct materials (250,000/43,000×9,500) (55,233)
Direct labor (470,000/43,000×9,500) (103,837)
Variable manufacturing overhead (120,000/43,000×9,500) (26,512)
Variable selling and administrative (65,000/43,000×9,500) (14,360)
Additional fixed manufacturing overhead costs (11,000)
Net Income 283,058
Therefore an increase of $283,058 would be expected from accepting a special order.
