Mars Corporation received a request from a customer to purchase 2,300 units of one of...
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Accounting
Mars Corporation received a request from a customer to purchase 2,300 units of one of their products, if Mars will customize it to fit their specific needs. To customize it, Mars' variable overhead costs will increase by $1.80 per unit. The customer has offered to buy it at a price of $37 per unit. This product, without customization, has the following costs:
Unit Cost
Direct materials
$4.70
Direct labor
$3.00
Fixed overhead
$6.70
Variable overhead
$1.80
Mars has enough capacity to produce these customized units, but will have to purchase a new machine to complete production. This machine will cost $17,000 and will be sold after production for $2,000. The incremental profit (loss) associated with decision is (incremental losses are indicated by a negative (-) sign):
Garrison 16e Rechecks 2017-12-15
Multiple Choice
-44,110
43,700
-28,700
44,110
28,700
Answer & Explanation
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