Core manufacturing makes a single product. Budget information regarding the curr

Question

Core manufacturing makes a single product. Budget information regarding the current period is a given below. Dear Company approaches Core with a special order for 15,000 units at a price of $8 50 per unit Variable costs will be the same as the current production and accepting the special older will not have any impact on the rest of the company's orders however Core is operating at capacity and will incur an additional $55,000 in fixed manufacturing overhead if the order is accepted What is the incremental income (loss) associated with accepting the special order? $48,000 $134,500 $7,000 $23,500

Explanation / Answer

Current Production Per unit Special Order Revenue 800000 8 127500 DM 170000 1.7 25500 DL 125000 1.25 18750 Variable overhead 235000 2.35 35250 Fixed Overheads 110000 1.1 55000 Net Income 160000 -7000 Net Loss = $ 7000 The correct answer is C. ( $ 7000)

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