Wharton Company has the capacity to produce 50,000 units per year. The company sells each unit for $125. Budgeted information is as follows:   Revenues   $5,612,000 Direct materials   $1,932,000 Direct labor   552,000 Manufacturing overhead (fixed)   276,000 Manufacturing overhead (variable) 552,000 3,312,000 Total   $2,300,000 A special order has been received for 5,000 units to be sold for $80 per unit. The company would incur an additional $60,000 in total fixed costs in order to lease a special machine in order to make a slight modification to the original product. Should the company accept the special order? A. Yes, the revenue will increase substantially. B. No, total costs would increase by $303,600. C. Yes, profit will increase by $36,400. D. No, accepting this order would decrease profits to $2,263,600.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Wharton Company has the capacity to produce 50,000 units per year. The company sells each unit for $125. Budgeted information is as follows:

 

Revenues   $5,612,000
Direct materials   $1,932,000
Direct labor   552,000
Manufacturing overhead (fixed)   276,000
Manufacturing overhead (variable) 552,000 3,312,000
Total   $2,300,000

A special order has been received for 5,000 units to be sold for $80 per unit. The company would incur an additional $60,000 in total fixed costs in order to lease a special machine in order to make a slight modification to the original product. Should the company accept the special order?

A. Yes, the revenue will increase substantially.

B. No, total costs would increase by $303,600.

C. Yes, profit will increase by $36,400.

D. No, accepting this order would decrease profits to $2,263,600.

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