Question

Marx is a service company owned by Michael Jones that will “plant” plastic flamingos on a special day in people’s yards to help celebrate and advertise birthdays, births, anniversaries, and other important milestones. The average delivery is priced at $75. The costs of providing 775 deliveries in the past year were:

Direct labor		$	13,175
Variable overhead			7,750
Fixed overhead (advertising costs, phone service, insurance)			15,000
Total cost		$	35,925

At the start of the current year, Jones received a phone call from the local Rotary club. The club would like to contract with Marx to have flamingos delivered to the yards of each of its members in the upcoming year; this contract would provide an additional 180 deliveries for Marx. However, the club wants a special price since it is ordering a large number of deliveries; it has said it would like a price of $59 per delivery. Marx can make up to 1,000 deliveries per year without incurring additional fixed costs.

What will be the affect on profit if Jones accepts the special order? (Enter decrease in profit using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Profit will INCREASE by $______________________ per year.

Can you please show your work step by step please?

Answer 1