Incremental Analysis - Accepting a Special Order

question 71

Essay

Incremental analysis - accepting a special order
Essential Company normally produces and sells 4,000 video monitors for personal computers each month.Variable manufacturing costs amount to $62 per unit,and fixed manufacturing costs are $170,000 per month.The regular sales price of the monitors is $140 per unit.The company is considering a special order from a foreign computer maker to buy an additional 1,000 monitors per month at a special price of $70 per unit.Filling this special order would not affect Essential Company's regular sales volume or fixed manufacturing costs.
(a)The average cost per unit at the 4,000-unit-per-month production level is $________ per unit.
(b)The average cost per unit at the 5,000-unit-per-month production level is $________ per unit.
(c)The amount of increase or decrease (indicate the correct term)in Essential Company's operating income that would result from accepting the special order is $________.

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