Assume That the Monthly Capacity of a Sporting Goods Business

question 83

Essay

Assume that the monthly capacity of a sporting goods business is 25,000 soccer balls. Current sales and production are averaging 20,000 soccer balls per month, and the soccer balls sell for $40 each. The business receives an offer from an exporter for 5,000 footballs at $36 each. Pricing policies in the domestic market will not be affected, and production can be spread over three months. Variable costs per unit consist of $11.00 for direct materials, $9.00 for direct labor, and $5.00 for variable manufacturing overhead. Fixed costs are $15.00 per unit. What is the differential income or loss from accepting the special order?

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Definitions:

Economy Changing

Refers to the dynamics and shifts occurring over time within an economic system, affecting growth, employment, and resources distribution.

Labor Demand

The total amount of workers that employers are willing and able to hire at a given wage rate, in a given time period.

Firm's Product

The goods or services produced by a firm, designed to meet consumer needs or desires, distinguishing the firm in its market.

Frictional Unemployment

Short-term unemployment that arises from the process of matching workers with jobs.