(Solved) Australia Company manufactures sonars for fishing boats. Model 70 sells for $260. Australia produces ...

Australia Company manufactures sonars for fishing boats. Model 70 sells for $260. Australia produces and sells 5,600 of them per year. Cost data are as follows:

Variable manufacturing   $110   per unit
Variable selling and administrative   $15   per unit
Fixed manufacturing   $280,000   per year
Fixed selling and administrative   $160,000   per year

A potential deal has come up for a one-time sale of 32 units at a special price of $115 per unit. The marketing manager states that the sale will not negatively impact the company's regular sales activities and will require the normal variable manufacturing costs and selling and administrative costs. The production manager states that there is plenty of excess capacity and the deal will not impact fixed costs. The controller points out, however, that because the expected increase in revenues are equal to the expected increase in costs to fill the order, the deal will not have any impact on the bottom line. The controller is correct in his statement.
A) True
B) False

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Australia Company manufactures sonars for fishing boats. Model 70 sells for $260. Australia produces ...

Horngren's Financial & Managerial Accounting, The Financial Chapters

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