The Mixed Products Company sells one of its products for $180 per unit. The Company incurs the following costs per unit:
Direct materials $40.00
Direct labor 18.00
Variable manufacturing overhead 7.50
Variable selling expenses 4.00
Fixed manufacturing overhead 25.00*
* $2,500,000 total fixed manufacturing overhead/ 100,000
The company has enough idle capacity to accept a one-time only special order for 20,000 units of the product for $90 per unit and will not incur any additional selling expenses if it accepts the order.
Required: Show with calculations how accepting the one-time order will affect the company’s operating income.
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