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Lattimer Company had the following results of operations for the past year: Sales (15,000 units at $12.25) $183,750 Variable manufacturing costs $101,250 Fixed manufacturing costs 24,750 Selling and administrative expenses (all fixed) 39,750 (165,750) Operating income $18,000 A foreign company whose sales will not affect Lattimer's market offers to buy 5,500 units at $8.00 per unit. In addition to existing costs, selling these units would add a $0.30 selling cost for export fees. If Lattimer accepts this additional business, the special order will yield a:
a. $3,850 loss.
b. $6,875 profit.
c. $2,200 loss.
d. $5,225 profit.
e. $9,350 loss.

Respuesta :

cancinodavidq

Answer:

d. $5,225 profit.

Explanation:

After accepting the offer total sales would be = 183750 (5500*8)

183.750+ 44.000

227.750

Variable cost per unit = 101.250/15.000 = 6.75

So total VC after accepting the order will be = 101.250+ (5.500*6.75)

101.250+ 37.125

138.375.

Income statement after accepting the offer

  • Sales  

227750

  • COGS  

138375

  • Export fee (5500*.30)  

1650

  • Manufacturing cost  

24750

  • selling & admn  

39750

  • Total cost  

204525

  • Income  

23225

So earlier the net Income was 18000, now it is 23225

Profit after accepting the order = 23225-18000 = 5225

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