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Question - Variable costs and fixed costs for the current activity level of a manufacturer is as follows:
Production costs
Variable costs:
Manufacturing:
Direct labour $375 000
Direct material $262 500
Marketing $187 500
Total variable costs $825 000
Fixed costs:
Manufacturing $275 000
Marketing $175 000
Total fixed costs $450 000
Total costs $1 275 000
Variable cost per unit $110
Fixed cost per unit $60
Average unit cost $170
Current monthly production is 7,500 units. The firm has just received a special one-time order for 2,538 products at $128 per unit. For this particular offer, no variable marketing costs will be incurred. What is the contribution to profit from accepting the special order?
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