Existing fixed manufacturing overhead costs

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Reference no: EM131211580

Pollock Corporation has received a request for a special order of 6,000 units of product Y45 for $13.70 each. Product Y45's unit product cost is $11.50, determined as follows:

Direct Materials $2.50

Direct Labor $1.90

Variable Mfg Overhead $2.30

Fixed Mfg Overhead $4.80

Unit Product Cost $11.50

This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order, and the special order would have no effect on the company's existing fixed manufacturing overhead costs. The customer would like modifications made to product Y45 that would increase the variable costs by $8.23 per unit and that would also require an investment of $19,820 in special molds that would have no other use and no salvage value. Should Pollock accept the special order? If the special order is accepted, the company's overall net operating income would increase (decrease) by how much? Show your work

Reference no: EM131211580

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