Marcy has received a special order for 2,000 units of its product at a special price of $60. The product normally sells for $80 and has the following manufacturing costs: Assume that Marcy has sufficient capacity to fill the order without harming normal production and sales and all fixed overhead is unavoidable.
a. If Marcy accepts the order, what effect will the order have on the company's short-term profit?
b. What minimum price should Marcy charge to achieve a $20,000 incremental profit?
c. Now assume Marcy is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Marcy accepts the order, what effect will the order have on the company's short-term profit?

Question

Marcy has received a special order for 2,000 units of its product at a special price of $60. The product normally sells for $80 and has the following manufacturing costs:  Assume that Marcy has sufficient capacity to fill the order without harming normal production and sales and all fixed overhead is unavoidable.
a. If Marcy accepts the order, what effect will the order have on the company's short-term profit?
b. What minimum price should Marcy charge to achieve a $20,000 incremental profit?
c. Now assume Marcy is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Marcy accepts the order, what effect will the order have on the company's short-term profit?

Quizplus · Accepted Answer

The Answer of Marcy has received a special order for 2,000 units of its product at a special price of $60. The product normally sells for $80 and has the following manufacturing costs:  Assume that Marcy has sufficient capacity to fill the order without harming normal production and sales and all fixed overhead is unavoidable.
a. If Marcy accepts the order, what effect will the order have on the company's short-term profit?
b. What minimum price should Marcy charge to achieve a $20,000 incremental profit?
c. Now assume Marcy is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Marcy accepts the order, what effect will the order have on the company's short-term profit?

Marcy Has Received a Special Order for 2,000 Units of Its