Reference no: EM132782206
Special Order
Tobitzu TV produces wall mounts for flat panel television sets. The forecasted income statement for 2009 is as follows:
TOBITZU TV
Budgeted Income Statement Income Statement 2009
Sales 4,900,000.00
Cost of Goods Sold (3,200,000.00)
Gross Profit 1,700,000.00
Selling Expenses (400,000.00)
Net Income 1,300,000.00
Additional Information
(1) Of the production costs and selling expenses, $600,000 and $100,000, respectively, are fixed.
(2) Tobitzu TV received a special order from a hospital supply company offering to buy 12,000 wall mounts for $30. If it accepts the order, there will be no additional selling expenses, and there is currently sufficient excess capacity to fill the order. The company's sales manager argues for rejecting the order because "we are not in the business of paying $32 to make a product to sell for $30."
Problem 1: Calculate the net benefit (cost) of accepting the special order.