Question

Minor Electric has received a special one-time order for 1,500 light fixtures (units) at $5 per unit. Minor currently produces and sells 7,500 units at $6.00 each. Minor has the capacity to produce 10,000 light fixtures. Production costs for these units are $4.50 per unit, which includes $3.00 of variable costs and $1.50 for fixed costs. To produce the special order, a new machine needs to be purchased at a cost of $1,000 with a zero salvage value. Management expects no other changes in costs to be incurred as a result of the additional production. If Minor accepts the special order its profit on this product line will be? Include both regular and special order sales in your calculation.

Answer 1