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Question
Variations Company had the following results of operations for the past year:| Sales (8,000 units at $7.00) | $ 56,000 |
| Variable manufacturing costs | (30,000) |
| Fixed manufacturing costs | (6,000) |
| Fixed selling and administrative expenses | (4,500) |
| Operating income | $ 15,500 |
A foreign company (whose sales will not affect Variations' regular sales) offers to buy 700 units at $4.00 per unit. In addition to variable manufacturing costs, there would be an export cost of $0.30 per unit. Prepare an analysis of this additional business to show whether Variations should take this order.
Answer
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