Goshford Company produces a single product and has capacity to produce 190,000 units per month. Costs to produce its current sales of 152,000 units follow. The regular selling price of the product is $120 per unit. Management is approached by a new customer who wants to purchase 38,000 units of the product for $79.20 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead and no additional fixed selling and administrative expenses. The customer is not in the company’s regular selling territory, so there will be a $6.40 per unit shipping expense in addition to the regular variable selling and administrative expenses. Per Unit Costs at
152,000 Units
Direct materials $ 12.50 $ 1,900,000
Direct labor 15.00 2,280,000
Variable manufacturing overhead 13.00 1,976,000
Fixed manufacturing overhead 17.50 2,660,000
Variable selling and administrative expenses 15.00 2,280,000
Fixed selling and administrative expenses 15.00 2,280,000
Totals $ 88.00 $ 13,376,000
Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $79.20 per unit.
Additional Volume Combined Total Normal Volume 0 Costs and expenses: 0 0 0 0 Total costs and expenses Net income (loss) 0 0