Sales $528,000 Variable manufacturing costs 288,000 Fixed manufacturing costs 120,0…

Sales

$528,000

Variable manufacturing costs

288,000

Fixed manufacturing costs

120,000

Variable selling costs

52,800

Fixed administration costs

35,200

Rhythm Co. has offered to purchase 3,000 radios at $16 each. Sound estimates approximately 5,000 units could be made with the capacity currently available in the factory. The owner of Sound is in favor of accepting the order. She feels it would be profitable because no variable selling costs will be incurred. The plant manager is opposed because his “full cost” of production is $17. What would the change in profit be if the special order is accepted?

b.        

Per unit

Total (3,000 units)

Incremental Revenue

$16

$48,000

Incremental Costs

12

36,000

Incremental Income

$4

$12,000

Im wondering how they got the incremental costs.

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