Question - Val Company currently has the capacity to manufacture 250,000 widgets a year. The widgets normally sell for $8.00 each.
Val Company has the following costs related to manufacturing and selling 200,000 widgets:
Direct materials $300,000
Direct labor $540,000
Variable manufacturing overhead $180,000
Depreciation on equipment only used for the widgets $40,000
Depreciation on factory $100,000
Salary of widget production manager $70,000
Variable selling costs (commissions) $60,000
Fixed selling costs $80,000
Total $1,370,000
Assume Minot Inc. asks Val to complete a manufacture a special order of 10,000 widgets. Minot is willing to pay $5.50 per widget (and the sales commission will apply on this special order).
By how much will Vals income change if they accept the special order?