Grill Time Sells Its Barbecue Sets for $170 Each * $ 1,800,000 / 75,000 Units
Grill Time Has Enough

question 164

Essay

Grill Time sells its barbecue sets for $170 each.Suppose the company incurs the following average cost per barbecue set:
$\begin{array}{ll}\text { Direct materials } & \$ 52 \\\text { Direct labor } & 28 \\\text { Variable mantufacturing overhead } & 11 \\\text { Variable selling expenses } & 5\\\text { Fixed manufacturing overhead }{ }^{*}&24\\\text { Total cost }&\$120\end{array}$ * $ 1,800,000 / 75,000 units
Grill Time has enough idle capacity to accept a one-time-only special order from Backyard Living,Inc.for 2,000 barbecue sets at a sales price of $130 per set.Grill Time will not incur $2 of variable selling expenses for this order.
How would accepting the order affect Grill Time's operating income?

Understand the relationship between price, marginal cost, and marginal revenue in monopolistically competitive settings.

Analyze the entry and exit dynamics in monopolistically competitive markets and their impact on firms' economic profits.

Interpret and analyze profit and loss situations from graphical representations in the context of monopolistic competition.

Understand the concept of monopolistic competition and how it differs from perfect competition.

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