Capitol, Incorporated has received a special order for 2,000 units of its product at a...
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Accounting
Capitol, Incorporated has received a special order for 2,000 units of its product at a special price of $195. The product normally sells for $260 and has the following manufacturing costs:
Cost per Unit
Direct materials
$ 78
Direct labor
52
Variable manufacturing overhead
39
Fixed manufacturing overhead
65
Total unit cost
$ 234
Assume that Capitol has sufficient capacity to fill the order without harming normal production and sales.
Required:
If Capitol accepts the order, what effect will the order have on the companys short-term profit?
What minimum unit price should Capitol charge to achieve a $65,000 incremental profit?
Now, assume Capitol is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Capitol accepts the order, what effect will the order have on the companys short-term profit?
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