Blowing Sand Company has just received a one-time offer to purchase 8,400 units of its Gusty model for a price of $25 each. The Gusty model costs $29 to produce ($19 in variable costs and $10 of fixed overhead). Because the offer came during a slow production month, Blowing Sand has enough excess capacity to accept the order.

1. Should Blowing Sand accept the special order?
-Yes
-No

2. Calculate the increase or decrease in short-term profit from accepting the special order.
Profit (Increases or Decreases) by _____

Blowing Sand Company has just received a one-time offer to purchase 8,400 units of its Gusty model for a price of $25 each. The Gusty model costs $29 to produce ($19 in variable costs and $10 of fixed overhead).

Becuase there is unused capacity and it is a special oofer, we will not have into account the fixed costs.

A) Blowing Sand should accept the special offer because it covers the variable cost.

B) Increase in income= (8400*25) - (8400*19)= $50,400

ewomazinoade ewomazinoade · Answer 2 · 2022-03-25T13:13:41+01:00

The special order should be accepted by Blowing sand.

The increase in short-term profit from accepting the special order is $50,400.

What is the profit from receiving the special order?

Fixed cost would not be calculated because it is a special offer and the business has excess capacity. The special order should be accepted because the price is greater than the variable cost.

Profit = (price - variable cost) x units purchased

($25 - %19) x 8400 = $50.400

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