By how much will vals income change

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Question - Val Company currently has the capacity to manufacture 250,000 widgets a year. The widgets normally sell for $8.00 each.

Val Company has the following costs related to manufacturing and selling 200,000 widgets:

Direct materials

$300,000

Direct labor

$540,000

Variable manufacturing overhead

$180,000

Depreciation on equipment only used for the widgets

$40,000

Depreciation on factory

$100,000

Salary of widget production manager

$70,000

Variable selling costs (commissions)

$60,000

Fixed selling costs

$80,000

Total

$1,370,000

Assume Minot Inc. asks Val to complete a manufacture a special order of 10,000 widgets. Minot is willing to pay $5.50 per widget (and the sales commission will apply on this special order).

By how much will Vals income change if they accept the special order?

Reference no: EM132106215

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