Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 60,000 units per year is: Direct materials $ 5.10 Direct labor $ 3.80 Variable manufacturing overhead $ 1.00 Fixed manufacturing overhead $ 4.20 Variable selling and administrative expense $ 1.50 Fixed selling and administrative expense $ 2.40 The normal selling price is $21 per unit. The company’s capacity is 75,000 units per year. An order has been received from a mail-order house for 15,000 units at a special price of $14.00 per unit. This order would not affect regular sales or the company’s total fixed costs. Required: 1. What is the financial advantage (disadvantage) of accepting the special order

Provided the activity of the company will not be hampered, with this special order, no additional fixed cost will be incurred, thus will not be considered.

Further variable cost per unit will be

Direct material = $5.10

Direct Labor = $3.80

Variable Manufacturing Overhead = $1.00

Variable Selling & Administrative Expense = $1.50

Total variable expense = $11.4

Order of 15,000 units will be sold at $14 per unit.

Therefore financial advantage = $14 - $11.40 = $2.60 per unit

Net financial advantage for accepting order = $2.60 [tex]\times[/tex] 15,000 = $39,000