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Managerial Accounting

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Lambert: Special Order Selling Costs Change to Profits

MGRACT-AGCYGZ

Lambert Partners received at order for 1,000 units from a new customer. The customer is willing to pay $17 per unit. The manufacturing costs for the recent period shows:

Manufacturing costs of 100,000 parts:
Direct Materials \$800,000
Direct Labor \$300,000
Variable Manufacturing Overhead \$500,000
Fixed Manufacturing Overhead \$1,000,000
Total cost \$2,600,000

The shipping costs are estimated to be \$1.25 per unit and the sales commission, normally 3% of sales, would be waived. They have enough idle capacity to work the order and believe other customers will not be impacted.

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