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NY Memorabilia Company produces a souvenir plate which normally sells for $79.95. The company produces 1,500 plates annually but has the capacity to produce 2,000 plates. A special order for manufacturing and selling 200 plates at $49.95 has been received which would not disrupt current operations. Current costs for the plate are as follows:

Direct materials $17.00
Direct labor 14.50
Variable overhead 4.00
Fixed overhead 5.00
Total $40.50

In addition, the customer would like to add a date to each plate which would require an additional $2 per plate in additional labor costs and NY Memorabilia Company would also have to purchase a piece of equipment to create the date which would cost $1,000. This equipment would not have any other uses. Which statement is true with regard to this special order?

A. Incremental revenues will exceed incremental costs by $890.

B. Incremental revenues will exceed incremental costs by $2,890.

C. Incremental revenues will exceed incremental costs by $1,290.

D. Incremental revenues will exceed incremental costs by $1,490.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M943090

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