Question

Jerston Company has an annual plant capacity of 4,000 units. Data concerning this product are given...

Jerston Company has an annual plant capacity of 4,000 units. Data concerning this product are given below:

   Annual Sales at Regular Selling Prices    3,400 Units
   Manufacturing Costs:         
   Variable $15.00 Per Unit
   Fixed $60,000.00 Per Year
   Selling and Administrative Expenses:      
   Variable $4.00 Per Unit
   Fixed $8,500.00 Per Year

The company has received a special order for 600 units at a selling price of $22 each. Regular sales would not be affected, and sales commissions on the 600 units would be reduced by one-fourth. This special order would have no impact on total fixed costs.

INSTRUCTIONS Determine whether the company should accept the special order. When complete, answer each of the following by selecting the correct match from the list provided.

      -   

What is the incremental revenue related to the special order?
      -   

What is the incremental manufacturing costs related to the special order?
      -

What is the incremental selling and administrative expenses related to the special order?
      -

Is there an advantage or a disadvantage to accepting the special order?
      -   

What is the amount of the advantage or disadvantage related to accepting the special order?
A.

$2,400
B.

$1,800
C.

Advantage
D.

$13,200
E.

$9,000
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