Question

Jack Ltd received a special order from a supplier for 5000 units of a product that sells at $30 per unit. The incremental variable cost is $90 000. The company expects to save $5000 in ordering and other communication costs. If Jack Ltd agrees to the special order, it will forgo $55 400 in lost sales. What is the contribution from the special order?

		$90 000
		a loss of $4600
		$55 400
		$9600

Answer 1

Particular	Amount
Sale (5000*30)	1,50,000.00
Saving order & other Communication Cost	5,000.00
Total (A)	1,55,000.00
Incremental Variable cost	90,000.00
Lost of sale	55,400.00
Total Expense (B)	1,45,400.00
Net Profit (A-B)	9,600.00

Note

Forgo $55 400 in lost sales shall be recovery for the special order .