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Botts Co.: Special Order Selling Costs Change to Profits


Botts Co. received at order for 1,000 units from a new customer. They are willing to pay $18 per unit. The manufacturing costs for the recent period shows:

Manufacturing costs of 100,000 parts:
Direct Materials \$900,000
Direct Labor \$450,000
Variable Manufacturing Overhead \$500,000
Fixed Manufacturing Overhead \$1,000,000
Total cost \$2,850,000

The shipping costs are estimated to be \$1.00 per unit and the sales commission, normally 3% of sales would be 2% of sales.

What is the impact on Botts Co.'s profits if they accept and make this order?