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Question
Fleming Company had the following results of operations for the past year:
| Sales (10,000 units at $6.80) | $ 68,000 | |
| Materials and direct labor | (20,000 | ) |
| Overhead (40% variable) | (10,000 | ) |
| Selling and administrative expenses (all fixed) | (6,000 | ) |
| Operating income | $ 32,000 | |
A foreign company (whose sales will not affect Fleming's regular sales) offers to buy 2,000 units at $5 per unit. In addition to variable manufacturing costs, there would be shipping costs of $1,200 in total on these units. Should Fleming take this order? Explain.
Answer
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