Problem:
OWE Manufacturing Co. produces a single product, "G". Budgeted amounts for the coming year are as follows: Sales (120,000 units @ $10 each) $1,200,000 Direct material $360,000 ($3 per unit) Direct Labor $240,000 ($2 per unit) Variable overhead $120,000 ($1 per unit) Fixed overhead $240,000 Total Expenses per unit are therefore 3+2 +1 + 2 (fixed) = $8 Watch Industries has offered to purchase 1,000 units of "G" at a price of $7.25 per unit. These will have additional variable costs of $0.25 per unit over the old variable costs. . Dran has the capacity to produce this order and will not affect any of their other operations.
Required:
Question 1: What is the incremental revenue associated with accepting this special order?
Question 2: What is the incremental cost associated with the special order?
Question 3: What is the incremental profit or loss expected to be generated? (net of Revenue -Expenses)
Question 4: Should they accept the special order? Why or why not?
Note: Please provide full description.