Question

A company manufactures a product that is sold for $37.95 each. Plant capacity is 750,000 units annually, but normal volume is 500,000 units. Costs at a normal volume are given below.

	Unit Cost
Direct Materials	$9.72
Direct Labor	$4.79
Variable Manufacturing Overhead	$11.21
Fixed Costs	$4.37
Selling and Administrative Variable Expense	$2.28

A customer offered to purchase 50,000 units at $33.72 each to be packaged in large cartons, not the normal individual product containers. It will pick up the units in its own trucks. Thus, variable selling and administrative expense per unit will decrease by 55%. What is the extra operating income this company will receive if they accept this order (Enter your answer for ALL 50,000 units in the special order).  

Round your answer the nearest whole number. Do not round any intermediate calculations.

Answer 1