Wehrs Corporation hasreceived a request for a special order of 6,000 units of produc k19for $32.30 each. The normal selling price of this product is $33.45each, but the units would need to be modified slightly for thecustomer. The normal unit product cost of product K19 is computedas follows. Directmaterial…………………………………..$15.00
Directlabor…………………………………………3.80
variable manufacturing overhead………1.40
Fixed manufacturing overhead…………2.10
unit product cost………………………………….22.30
Direct labor is a variable cost. The special order would have no effect on the company’s totalfixed manufacturing overhead costs. The customer would like somemodifications made to product K19 that would increase the variablecosts by $4.90 per unit and that would require a one-timeinvestment of $23,000 in special molds that would have no salvagevalue. This special order would have no effect on thecompany’s other sales. The company has ample spare capacityfor producing the special order.
Required:
Determine the effect on the company’s total net operatingincome of accepting the special order. Show your work