Response to the following problem:
Producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine.
Lost Mine has offered to buy 2,900 of the US umbrellas at a price of $27 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella:
|
| Direct materials |
$ |
12.00 |
| Direct labor |
|
6.00 |
| Variable manufacturing overhead |
|
8.00 |
| Fixed manufacturing overhead |
|
2.50 |
| Total cost |
$ |
28.50 |
| Regular sales price |
$ |
35.00 |
Required:
1. Compute the incremental profit (or loss) from accepting the special order.