What will be the affect on income if ccc accepts this order

Reference no: EM13568457

Country Cap Company (CCC) manufactures and sells ball caps with a special logo on the back of the cap that it has copyrighted. CCC sells its caps through many retail outlets and it has a set price of $23.00. Recently, the National Basketball Association (NBA) has approached CCC with an offer to to purchase 10,000 caps for $170,000 for this year's NBA Playoffs. The NBA caps require the use of NBA's own logo and will cause CCC to purchase a special machine and set-up costing $10,000 with no apparent future use or value (the machine imprints the 2011 championship winning team logo). CCC cost structure for the production of its caps is as follows:

Direct material: $7.00

Direct labor:....$2.00

Manufacturing Overhead: $8.00

In addition to the costs above, the special logo application will cost $2.00 per cap. While most of the Manufacturing Overhead is fixed, Variable Overhead is estimated at $3.00 per cap. It is expected that this order can be fulfilled within the existing capacity of CCC and will not affect existing sales.

Required: What will be the affect on income if CCC accepts this order? Based on your answer of income, should CCC accept the order? Show all your work for point consideration.

Reference no: EM13568457

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