Falcon Co. produces a single product. Its normal selling price is $27 per unit. The variable costs are $17 per unit. Fixed costs are $21,400 for a normal production run of 5,000 units per month. Falcon received a request for aspecial order that would not interfere with normal sales. The order was for 1,530 units with a special price of $19 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $2 per unitwould be eliminated. If the order is accepted, the differential effect on profit would be a(n)O a increase of $4,896O b. increase of $7,956Oc. increase of $6,120O d. decrease of $3.672

Special offer does not affect the fixed cost if the special order is under the capacity. So…

Answered: Falcon Co. produces a single product.…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 54P

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